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Author: 


Dallas  Real  Estate  Board 


Title: 


Modern  real  estate 
practice 

Place: 

Dallas 

Date: 

1922 


MASTER   NEGATIVE   # 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


ORIGINAL  MATERIAL  AS  FILMED  -    EXISTING  BIBLIOGRAPHIC  RECORD 


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Southorn  methodist  university,  . 

Dallas  school  of  oommorce^ 

ilodern  real  estate  practice •  Loctiires  delivore 
by  members  of  the  Dallas  real  estate  board  before 
the  Dallas  school  of  commerce  of  Southern 
methodist  university,  Dallas  ^Venney  co»^  1922 • 

129  p.    21v7  cm. 

Contents* — 1.  History  and  development  of  real 
property,  by  K.  W.  Fisher. —  2*   History  and 
dovelopmont  of  lea»^^^  es,  by  Frank  L.  McNony. —  3« 
Real  estate  adver*-  _^  tising,  by  Lawrence  Miller.^ 

(continued  on  next  card ) 

^ -f — — — — ~— >^^»~*i 


Southorn  methodist  university,  '    -  .  V  .       | 
Dallas  school  of  commerce.  Modern  real  estate 
practice.   1922.   (card  2) 

4.  Real  estate  salesmanship,  by  R.  Porter 
Lindsley. —  5.  Real  estate  law,  by  George  T. 
Burgess. —  6.  Conveyancing,  by  W.  W.  Fisher. —  7. 
Mortgage  loans,  by  E.  E.  Shelton. — 8.  Development 
of  suburban  property,  by  Hugh  E.  Prather. — 9. 
History  and  development  of  businens  property,  by 
Fletcher  F.  MoNeny. — 10.  Trustees  and  property 
management,  by  G.  /'''%N.  Aldredge.—  11.  Taxation 

(continued  on  next  ciird) 


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CHOOL  OF  BUSINESS 

MODERN 

REAL  ESTATE 

PRACTICE 


'0'%!i 


Lectures  Delivered  by 
Members  of  the 

Dallas  Real  Estate  Board 


■BEFORE  THE- 


Dallas  School 
of  Commerce 

of 

Southern  Methodic  University 

AAA 

3}  DALLAS,  TEXAS 

3;35~  January  1st,  1922 


^o^ 


LIBRARY 


School  of  Business 


u 


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_         Modern 
Real  Estate  Practice 


>■ 


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»*.-—.  — •-' 


Lectures  Delivered  by 
Members  of  the 

Dallas  Real  Estate  Board 


-BEFORE  THE- 


DALLAS  School 
of  Commerce 

of 

Southern  Methodic  University 

▼  ▼  T 

DALLAS,  TEXAS 
January  1st,  1922 


FOR  INFORMATION 

H.  A.   BOAZ,   President,   Southern  Methodist  University 
W.   C.  WALES,   Secretary,   Dallas  School  of  Commerce.   S.  M.  U. 


1 


Contents 

▼     ▼     T 

Page 

Lecture  1— Historj'  and  Development  of  Real  Property 5-19 

H.  W.  FISHER 

Lecture  2 — History  and  Development  of  Leases 21-30 

FRANK  L.  McNENY 

Lecture  3 — Real  Estate  Advertising 31-37 

LAWRENCE  MILLER 

Lecture  4— Real  Estate  Salesmanship 39-47 

R.  PORTER  LINDSLEY 

Lecture  5— Real  Estate  Law 49-54 

GEORGE  T.   BURGESS 

Lecture  6 — Conveyancing 55-66 

W.  W.   FISHER 

Lecture  7 — Mortgage  Loans  67-76 

B.  E.  SHELTON 

Lecture  8— Development  of  Suburban  Property 77-90 

HUGH  E.  PRATHER 

Lecture  9— History  and  Development  of  Business  Property  91-100 

FLETCHER  F.  McNENY 

Lecture  10— Trustees  and  Property  Management 101-112 

G.  N.  ALDREDGE 

Lecture  11— Taxation  113-119 

L.  L.  BRISTOL 

Lecture  12— The  Realtor,  His  Work,  Opportunities  and 

Responsibilities  121-129 

J.  B.  RUCKBR 


/ 


The  Venney  Co. 


T 


Dallas   School  0/   Commerce 


cr 


Joreword 


I 


'npHE  enclosed  series  of  lectures  was  originally  used 
-*•  as  the  basis  of  the  course  in  REAL  ESTATE 
METHODS,  offered  by  the  Dallas  School  of  Com- 
merce of  Southern  Methodist  University  in  co- 
operation with  the  Dallas  Real  Estate  Board,  Dal- 
las, Texas. 

"PACH  lecture  represents  a  thorough  study  and 
analysis  of  the  subject  discussed,  prepared  by  a 
man  well  qualified  by  experience  to  do  the  work. 
The  Dallas  School  of  Commerce  extends  its  appre- 
ciation to  these  men,  who  gave  their  time  and 
energy  to  the  work: 


^' 


l\  t 


•\ 


Mr.  G.  N.  Aldredge. 
Mr.  L.  L.  Bristol. 
Mr.  G.  T.  Burgess. 
Mr.  H.  W.  Fisher. 
Mr.  W.  W.  Fisher. 
Mr.  R.  P.  Lindsley. 


Mr.  Frank  L.  McNeny. 
Mr.  Fletcher  F.  McNeny. 
Mr.  Lawrence  Miller. 
Mr.  Hugh  E.  Prather. 
Mr.  J.  B.  Rucker. 
Mr.  E.  E.  Shelton. 


t 


4^ 


HISTORY  AND  DEVELOPMENT  OF  REAL 

PROPERTY 


By  H.  W.  Fisher. 

The  right  of  property,  or  that  dominion  which  one 
man  claims  and  exercises  over  the  external  things  of  this 
world  in  total  exclusion  of  the  right  of  any  other  indi- 
vidual, presents  perhaps  the  most  absorbing  subject 
which  interests  all  mankind.  Rights  in  real  property,  or 
in  land,  on  account  of  man's  innate  love  of  the  soil,  are 
probably  nearer  and  dearer  to  the  hearts  of  man  than 
any  other  property  rights.  Yet  how  few  of  us  there  are 
who  ever  stop  to  consider  the  origin  and  foundation  and 
the  development  of  this  right  of  real  property. 

We  get  it  from  the  Holy-Writ,  that  the  earth  and  all 
things  therein  are  the  general  property  of  all  mankind,  as 
the  immediate  gift  of  the  Creator,  and  during  the  very 
early  history  of  man,  it  is  easy  to  understand  that  all  was 
in  common  among  mankind,  and  that  each  person  took 
and  used  whatever  was  needed  for  his  livelihood.  In 
these  earlier  days  probably  no  man  had  any  conception 
of  real  property,  and  only  his  weapons  of  the  chase  and 
his  rude  clothing  were  considered  as  belonging  solely  to 
the  individual.  But  as  man  increased  in  numbers  and 
as  he  learned  the  desirability  and  discovered  methods  of 
housing  himself  as  a  protection  against  the  elements,  a 
property  right  soon  estabUshed  itself  that  a  man's  abode 
was  his  own,  and  could  not  justly  be  seized  and  occupied 
by  another.  And  in  order  to  avoid  the  uncertainty  of  the 
chase  as  a  means  of  obtaining  flesh  to  eat,  man  was 
prompted  to  establish  also  a  property  right  in  his  flocks 
and  herds  of  the  more  domestic  animals. 

In  these  early  days  the  people  were  nomadic,  wander- 
ing about  and  establishing  their  temporary  domiciles  in 
such  spots  as  offered  them  the  easiest  living.  But  as  the 
population  continued  to  grow,  it  became  increasingly  dif- 
ficult to  find  new  places  of  settlement  without  encroach- 
ing upon  former  occupants. 

At  the  same  time  a  long  stay  in  the  same  place 
soon  diminished  the  fruits  of  the  earth  and  the  game  of 
the  fields  and  forests.  There  was,  therefore,  the  neces- 
sity of  some  more  regular  method  of  providing  a  constant 


e 


Modern  Real  Estate  Practice 


food  supply  and  this  necessity  finally  produced  the  art  of 
agriculture.  And  agriculture  necessarily  established  the 
idea  of  a  more  permanent  possession  of  the  soil,  for  no 
man  wished  to  devote  his  time  and  labor  to  tilling  the  soil 
if  another  might  step  in  and  seize  and  use  the  product  of 
his  labors.  Thus  we  see  that  the  necessities  of  life  were 
responsible  for  the  establishment  of  real  property.  We 
see  also  that  as  a  man  could  continue  to  occupy  and  claim 
ownership  only  with  the  sanction  and  protection  in  that 
right  by  his  neighbors,  that  real  property  is  not  a  natural 
but  a  social  right. 

This  right  of  the  individual  to  real  property,  however, 
did  not  spring  into  being  over  night.  Even  in  the  early 
days  of  agriculture,  the  peoples  of  the  world  usually  gath- 
ered themselves  together  in  tribes,  as  protection  against 
their  enemies  and  for  social  reasons,  and  the  cultivated 
lands  were  held  and  worked  in  common,  as  tribal  prop- 
erty. This  period  of  primitive  communism  must  have 
covered  many  centuries,  but  with  the  constitution  of  pri- 
vate families  within  the  tribes,  the  common  tribal  proj)- 
erty  began  to  be  parcelled  out  into  bits,  forming  the  col- 
lective property  of  the  family.  In  this  use  of  the  word 
family,  we  do  not  mean  the  father,  mother  and  children, 
such  as  constitute  modem  family,  but  all  those  persons 
within  the  tribe,  who  were  related  by  ties  of  blood.  The 
land  was  generally  parcelled  out  by  lot,  pasture,  hunting 
and  fishing  lands  still  being  held  in  common  by  the  tribe, 
made  up  of  many  families.  This  was  the  typical  pa- 
triarchy. As  time  passed  the  patriarchial  family  grad- 
ually disintegrated  and  was  superseded  by  the  modem 
family  as  we  know  it;  and  the  land  belonging  to.it  was 
parcelled  out  among  the  individuals  and  held  in  severalty. 
Thus,  we  come  down  to  the  period  of  private  ownership 
of  real  property.  It  must  be  noted  here,  however,  that 
these  lands  were  held  by  the  individuals  allodially.  By 
allodial  holdings  in  land  we  mean  possession  of  land  by 
man  strictly  in  his  own  right  without  owing  any  rent  or 
service  to  any  superior  or  any  government. 

The  history  and  development  of  real  property  up  to 
this  point  must  have  been  very  similar  among  all  peoples. 
In  our  further  discussions,  however,  we  will  have  refer- 
ence chiefly  to  the  development  of  real  property  in  Eng- 
land, for  it  is  from  the  common  law  of  that  country  that 
we  have  inherited  principally  our  customs  and  laws  per- 
taining to  real  property;  and  it  is  impossible  to  under- 


1 


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4 


Dallas   School  of   Commerce 


stand  the  English  laws  regulating  landed  property  with- 
out some  knowledge  of  the  feudal  laws  so  universally  fol- 
lowed in  England  and  indeed,  all  over  Europe  for  several 
centuries. 

The  feudal  system  had  its  origin  in  the  military  policy 
of  the  northern  Celtic  nations  called  the  Barbarians  by 
their  Roman  contemporaries.  In  order  to  hold  more  se- 
curely their  conquered  territories,  it  was  the  custom  of 
their  leaders  to  parcel  out  large  portions  of  land  to  the 
greater  of  their  chieftains,  who  in  tum  dealt  out  smaller 
portions  to  the  lesser  chieftains  and  leaders.  These  al- 
lotments were  called  feuds  or  fees,  signifying  a  reward 
or  stipend.  The  condition  of  the  awards  was  that  the 
possessor  should  do  service  to  him  by  whom  they  were 
given.  But  as  all  the  lands  came  from  the  right  of  con- 
quest, both  givers  and  receivers  were  mutually  pledged 
to  defend  each  other's  possessions.  Thus  was  formed  a 
military  machine  which  included  the  whole  of  a  people, 
from  the  lowest  retainer  to  the  general  or  chieftain  or 
prince  of  the  entire  nation.  It  is  probable  that  something 
akin  to  the  system  of  feudahsm  existed  in  England  even 
in  the  time  of  the  Saxons,  who  them^selves  were  one  of 
the  northern  races;  but  it  certainly  had  not  attained  a 
very  high  development  before  the  Norman  conquest  of 
England  in  1066. 

From  the  slaughter  of  the  English  nobility  at  the 
battle  of  Hastings  and  the  numerous  forfeitures  of  lands 
belonging  to  the  English  chieftains,  King  William  was 
enabled  to  reward  his  Norman  followers  with  very  exten- 
sive possessions,  and  these  chieftains  were  thoroughly 
imbued  with  the  feudal  idea  under  which  they  had  long 
lived.  Their  influences,  together  with  the  weakness  of 
the  nation  in  repelling  foreign  invasion,  strengthened 
this  feudal  idea,  so  that  when  William  in  the  20th  year 
of  his  reign,  called  together  his  nobles  at  Sarum,  all  the 
principal  land  holders  submitted  their  lands  to  the  yoke  of 
military  tenure,  became  the  king's  vassals  and  did  hom- 
age and  fealty  to  his  person.  The  laws  enacted  at  this 
council  of  Sarum  show  that  the  legal  establishment  of 
the  feudal  system  in  England  was  effected  at  this  time. 

As  a  consequence  of  this  change,  which  supposedly 
abolished  all  allodial  holdings  of  land,  it  became  a  neces- 
sary principle  of  all  land  tenures,  that  the  king  was  the 
lord  of  the  whole  country  and  the  original  proprietor  of 
all  the  lands  in  the  kingdom,  and  that  all  lands  were  re- 


1' 


8 


Modern  Real  Estate  Practice 


ceived  from  him  as  a  gift  to  be  held  upon  the  proper  re- 
turn of  feudal  services.  This  was,  in  a  measure,  a  mere 
fiction  in  England,  but  as  such  was  the  case  in  the  pure 
feudal  system,  any  country  which  adopted  the  system, 
was  obliged  to  act  upon  the  same  supposition.  The  grant- 
or, or  king,  was  called  the  lord,  and  he  supposedly  re- 
tained dominion  of  the  feud  or  fee,  while  the  grantee,  or 
recipient  of  the  feud  was  called  the  vassal.  The  vassal, 
or  tenant,  besides  the  oath  of  fealty,  did  homage  to  his 
lord  and  became  his  man.  The  services  rendered  in  re- 
turn for  the  lands  was  originally  only  two-fold :  To  fol- 
low, or  do  suit  to  the  lord  in  his  courts  in  time  of  peace, 
and  in  his  armies  when  necessity  demanded.  At  first  the 
feuds  were  held  at  the  will  of  the  lord,  who  was  the  sole 
judge  as  to  whether  his  vassals  performed  their  services 
faithfully;  but  in  time  feuds  were  extended  beyond  the 
life  of  the  first  vassal  to  his  sons,  and  later  to  the  family 
and  the  heirs  of  his  Wood.  In  the  beginning  also  the 
vassal  could  not  alienate  or  dispose  of  his  feud;  and  as 
the  feudal  system  was  reciprocal,  the  tenant  being  enti- 
tled to  his  lord's  protection  in  return  for  his  own  fealty 
and  service,  the  lord  could  no  more  transfer  his  seignory, 
or  protection,  without  the  consent  of  the  vassal,  than  the 
vassal  could  his  feud  without  the  consent  of  the  lord. 
These  were  the  principal  characteristics  of  the  original  or 
genuine  feuds,  which  were  all  of  a  military  nature;  but 
as  the  feudatories,  or  lords,  often  could  not  find  time  on 
account  of  military  duties  to  cultivate  their  lands,  they 
soon  found  it  necessary  to  grant  parts  of  their  holdings 
to  inferior  and  smaller  tenants,  pledging  them  to  such 
returns  in  service,  com  or  cattle,  as  might  enable  the 
chief  feudatories  to  attend  to  their  military  duties.  These 
lesser  tenants  were  under  similar  obligations  of  fealty 
and  homage  as  their  lords  were  to  their  superior.  This 
subinfeudation  destroyed  the  simplicity  of  feuds  and  in- 
troduced many  innovations  and  customs.  Persons  who 
held  direct  from  the  king  were  called  his  tenants  in  capite, 
and  this  was,  of  course,  the  highest  species  of  tenure. 
These  persons,  when  they  granted  out  portions  of  their 
lands  to  inferior  persons,  became  lords  in  respect  to  these 
persons,  and  were  called  mesne  lords,  or  middle  lords. 
The  services  due  to  the  lords  from  their  tenants  were 
classified  as  free  services,  which  were  services  not  un- 
becoming to  a  soldier  or  a  free  man  to  perform,  and  base 
services,  such  as  the  actual  work  on  the  lord's  lands  and 
other  menial  duties,  which  were  considered  fit  only  for 


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Dallas   School  of   Commerce 


9 


peasants,  or  persons  of  servile  rank.  From  the  various 
combinations  of  these  services  there  arose  three  different 
kinds  of  lay  tenure,  which  last  to  this  day  in  England. 

The  first  of  these,  and  the  most  honorable  species  of 
tenure  was  called  knight  service  and  this  character  of 
tenure  involved  chiefly  military  service  with  the  king  in 
time  of  war.  Gradually,  as  time  went  on,  the  holders  of 
knight  tenure  were  allowed  to  pay  certain  sums  of  money 
in  lieu  of  personal  military  service,  this  payment  being 
called  scutage,  or  escuage.  These  scutages,  levied  by  the 
king,  and  afterwards  assessed  by  Parliament,  were  the 
ground  work  of  all  succeeding  subsidies  and  of  the  land 
tax  of  more  modem  times.  But  as  the  feuds  cast  off 
their  purely  military  character,  fundamental  rules  of 
tenure  and  succession  were  changed,  and  in  time  the  sys- 
tem came  to  be  regarded  as  a  civil  rather  than  a  military 
establishment,  its  chief  purpose  being  to  raise  money  to 
pay  for  a  mercenary  army. 

The  second  great  class  of  tenure  was  called  Tenure  in 
Free  Socage.  The  distinctive  characteristics  of  this  class 
of  tenure  was  that  the  services  to  be  rendered  were  fixed 
and  determinate  in  amount,  as  opposed  to  the  uncertain 
services  of  knight  tenure;  and  it  consequently  included 
all  tenures  by  fixed  rents,  whether  these  rents  were  of 
considerable  pecuniary  value,  or  merely  nominal  in  order 
to  evidence  the  tenure.  A  man  holding  land  under  this 
kind  of  tenure  was  generally  said  to  hold  his  land  in  free 
and  common  socage  and  he  could  hold  direct  from  the 
king  or  from  a  middle  lord.  These  were  the  two  main 
species  of  tenure  under  which  freehold  lands  in  England 
were  held,  until  after  the  restoration  in  1660,  when  all 
tenures  by  knight  service  were  abolished,  so  that  lands 
of  both  sorts  were  thereafter  held  by  free  and  common 
socage. 

The  third  great  division  of  tenure  is  that  villenage, 
as  contradistinguished  from  free  tenure.  To  understand 
this  class  of  tenure  we  must  take  a  short  view  of  the 
nature  of  manorial  holdings,  so  called  from  being  the 
residence  of  the  owner.  The  manor  was  a  piece  of  ground 
held  by  lords  or  great  persons,  who  kept  for  their  own 
needs  so  much  of  the  land  as  was  necessary  for  them- 
selves and  their  families.  The  balance  of  the  land  was 
distributed  among  their  tenants,  some  of  this  land 
being  granted  by  the  lord  to  free  men  to  be  held  by  them 
as  tenants  in  knight  service,  or  in  free  socage,  or  by  the 


f 


10 


Modern  Real  Estate  Practice 


payment  of  certain  rents.   From  these  tenants  have  arisen 
most  of  the  freehold  tenants  in  England  who  hold  of  par- 
ticular manors.    Land  not  in  occupation  for  cultivation 
was  called  waste  land  and  as  such  might  be  used  by  all 
the  tenants  of  the  manor  for  common  pasturage,  for  hunt- 
ing, or  gathering  of  fuel,  though  it  still  belonged  to  the 
lord  of  the  manor.    In  addition  to  these  freemen  above 
mentioned,  there  was  always  on  the  manor  a  large  class 
of  persons  who  were  not  freemen  but  practically  slaves, 
as  they  were  not  permitted  to  own  property  and  could 
not  leave  the  manor  without  the  permission  of  their  lords. 
These  persons  were  called  villens,  and  they  had  allotted 
to  them  for  their  dwellings  and  maintenance,  part  of  the 
lord's  demesne  lands,  or  that  part  which  he  reserved  to 
himself  and  family.    Originally  these  holdings  were  held 
at  the  will  of  the  lord  of  the  manor  and  he  called  on  hr. 
tenants  in  villenage  for  any  sort  of  work  that  pleased 
him,  and  their  services  were  not  only  base,  but  uncertain 
as  to  time  and  quality.    From  this  you  will  understand 
that  the  villen  was  practically  a  slave.    As  time  went  on, 
however,  most  of  the  villens  practically  acquired  free- 
dom, and  the  usage  of  the  manor,  under  the  control  and 
influences  of  the  general  law  of  the  land,  imposed  restric- 
tions upon  the  right  of  the  lord  to  dispossess  them  from 
their  holdings.    The  amount  and  character  of  the  services 
they  were  compelled  to  render  also  became  determined 
by  the  custom  of  the  manor  and  these  customs  were  en- 
tered on  the  rolls  of  the  manorial  courts,  each  manor  hav- 
ing a  court  of  its  own  in  which  the  lord  sat  as  judge.    As 
such  tenants  had  nothing  to  show  for  their  lands,  except 
these  entries,  copies  of  the  rolls  were  often  delivered  to 
them  as  evidences  to  title,  and  they  were  called  "tenants 
by  copy  of  court  roll,"  and  their  tenure  was  called  a  copy- 
hold.   In  some  manors  there  are  copyholds  of  inheritance ; 
in  others  they  remain  copyholds  for  hfe,  all  according  to 
the  custom  of  the  particular  manor.    Tenancies  by  copy- 
hold exist  in  England  to  this  day.    Many  of  these  copy- 
holders are  descendants  of  former  villens  so  that  while 
their  families  sprung  from  a  humble  origin,  they  are 
very  ancient  and  have  a  great  deal  of  family  pride.    In 
passing,  it  is  further  interesting  to  note  that  all  manors 
existing  at  this  day  must  have  existed  as  early  as  the 
reign  of  King  Edward  I,  for  the  statute  of  Quia  Emptores 
in  1290  abolished  all  subinfeudation,  or  the  letting  out  of 
land  to  under  tenants.    The  Magna  Charter,  passed  dur- 
ing the  reign  of  King  John  in  A.  D.  1217,  provided  that 


I 


4 


i 


4» 


I 


1 


f 


Dallas   School  of  Commerce 


11 


no  man  should  sell  or  give  away  his  land  without  reserv- 
ing sufficient  to  answer  the  demand  of  his  lord.  Before 
the  Magna  Charta,  a  feudal  tenant  who  alienated  the 
whole  of  his  land  merely  put  a  new  tenant  in  his  place ; 
but  if  he  alienated  only  a  part  of  his  holdings,  the  effect 
was  to  create  a  new  tenure  by  subinfeudation.  This  act 
was  passed  in  the  interests  of  the  great  lords,  but  it  was 
found  inadequate,  and  the  statute  of  Quia  Emptores, 
passed  also  at  the  behest  of  the  great  lords,  denied  all 
right  of  subinfeudation.  Under  it  any  freeman  might 
dispose  of  all  or  any  part  of  his  holdings,  but  the  taker 
must  hold  it  from  the  same  chief  lord  and  by  the  same 
services.  This  act  made  the  condition  of  land  tenure 
far  more  simple  and  was  the  first  approximation  of  feudal 
tenancy  to  the  modem  conception  of  ownership. 

The  three  species  of  tenure  we  have  described  were 
certainly  the  most  important  lay  tenures  in  England, 
though  there  were  many  others,  such  as  tenure  by  grand 
serjeantry,  under  which  the  tenant  held  direct  from  the 
king,  the  tenure  being  based  on  some  honorary  personal 
service;  tenure  by  petty  serjeantry,  where  the  tenant  held 
direct  from  the  king  to  whom  he  yielded  some  trifle  in 
lieu  of  rent  and  services;  borough  English  tenure;  Bur- 
gage tenure,  gavelkind,  and  a  tenure  called  privileged 
villenage.  There  was  also  a  frankalmoigne  tenure,  under 
which  church  lands  were  held  in  return  for  religious  ser- 
vices. 

All  these  various  tenures  drew  after  them,  and  carried 
various  consequences  and  obligations.  The  military  ten- 
ures were  the  most  burdensome,  carrying  with  them  aids, 
(a  payment  on  the  marriage  of  the  lord's  son  or  daugh- 
ter, or  at  their  knighting) ,  reliefs,  (payments  made  to  the 
lord  upon  the  death  of  a  tenant  and  the  assumption  of 
the  tenure  by  his  heir) ,  primer  seisen,  (a  payment  to  the 
king  amounting  to  a  year's  profit  on  the  lands,  made  by  an 
heir  of  a  tenant  in  capite  upon  his  being  seized  of  the  fee) , 
wardship,  (the  lord  being  entitled  to  custody  of  the  land 
and  the  body  of  the  heir  until  he  or  she  became  of  age), 
marriage,  (consisting  of  the  right  of  the  lord  to  dispose 
of  his  ward  in  marriage  and  the  forfeiture  to  the  lord  of 
a  sum  equal  to  the  value  of  the  marriage,  if  the  heir 
married  without  the  lord's  consent) ;  fines  for  alienation, 
(the  payment  to  the  lord  when  a  tenant  conveyed  his 
land) ;  and  escheat,  (which  was  the  right  of  the  lord  upon 
the  death  of  a  tenant  without  any  heir,  to  hold  the  land 


■ 


¥ 


12 


Modern  Real  Estate  Practice 


free  from  further  burden  of  the  tenure.  In  other  words, 
the  land  went  back  to  the  lord.)  The  ceremony  of  in- 
vestiture included  the  livery  of  seisen,  or  delivering  actual 
corporeal  possession  of  the  land  and  the  ceremonies  of 
fealty  and  homage.  Socage  tenure  carried  with  it  many 
of  the  incidents  of  tenure  of  knight  service,  including 
aids,  reliefs,  primer  seisen,  marriage,  wardship,  fines, 
and  escheats,  but  these  incidents  in  the  case  of  socage 
tenure,  w^ere  made  less  burdensome,  and  its  services  were 
fixed,  or  rents  were  paid  in  lieu  of  all  services.  Fealty 
was  part  of  the  service  of  socage  tenure,  but  homage  was 
seldom  rendered  by  a  tenant  in  socage.  The  consequence 
of  villenage,  or  copyhold  tenure  that  it  has  in  common 
with  free  tenures  are  fealty,  services  (in  rents  or  other- 
wise), reliefs  and  escheat;  the  two  latter  belonging  only 
to  copyholds  of  inheritance. 

For  various  reasons  tenure  in  socage  continued  to 
grow  at  the  expense  of  the  other  tenures,  but  the  right 
of  wardship,  marriage  and  other  feudal  burdens  pressed 
heavily  on  a  large  portion  of  the  land  holders.  During 
the  usurpation,  all  military  tenures  were  discontinued, 
and  after  the  restoration  they  were  destroyed  at  one 
blow  in  1660  by  the  statute  of  Charles  II.  This*  statute 
provided  that  all  military  tenures  should  be  thereafter, 
tenures  in  free  and  common  socage,  and  all  burdens  in 
favor  of  the  lord,  whether  a  mesne  lord,  or  the  king,  were 
removed,  with  the  exception  of  certain  rents  and  one  or 
two  minor  services.  Fealty  and  relief  in  socage  tenures 
had  already  become  obsolete  and  the  statute  had 
no  effect  on  these  tenures  except  to  do  away 
with  fines  and  aids.  Escheat  was  about  the  only  incident 
of  the  feudal  tenure  that  remained.  The  result  of  this 
act  was  that  all  trace  of  resemblance  of  the  relation  be- 
tween freeholder  and  lord  passed  away,  except  within  the 
precincts  of  the  manor,  and  the  freeholder  became  for  all 
practical  purposes,  the  owner  of  the  soil. 

In  the  Colonies,  (referring  to  the  thirteen  original 
states) ,  the  lands  were  granted  to  the  colonial  proprietors 
to  hold  in  free  and  common  socage,  the  services  consist- 
ing sometimes  of  a  nominal  rent  and  sometimes  there 
merely  being  the  incident  of  fealty  to  mark  the  feudal 
relation.  After  the  American  revolution,  the  feudal  posi- 
tion of  the  paramount  lord,  or  king,  passed  to  the  states 
with  other  sovereign  rights.  However,  so  fundamental  an 
alteration  in  the  theory  of  property  as  the  abolition  of 


V" 


4  ,' 


i^m< 


f, 


Dallas   School  of  Commerce 


13 


tenure  could  hardly  be  brought  about  by  a  mere  change 
of  political  sovereignty.  Tenure  still  obtains  between  a 
tenant  for  life  or  years,  and  the  reversion ;  and  so  in  like 
manner  in  the  United  States,  it  is  conceived  that  a  tenant 
in  fee  simple  merely  holds  of  the  state.  In  a  number  of 
states,  in  view  of  certain  statutes  and  judicial  decisions, 
tenure  must  be  regarded  as  nonexistent.  In  this  latter 
class  of  states,  the  statute  of  Quia  Emptores  is,  of  course, 
not  in  force,  since  in  the  absence  of  tenure,  the  statute  is 
meaningless.  In  the  other  states,  however,  there  seems 
good  reason  to  assume  the  existence  of  tenure,  and  in 
these  states  the  statute  is  in  force  and  all  tenure  in  them, 
so  far  as  existent,  must  be  directly  of  the  state;  there 
being  no  subinfeudation,  which  was  prohibited  by  this 
statute.  The  single  incident  of  tenure  left  is  escheat, 
which  means  that  the  lands  revert  to  the  state  in  case  the 
possessor  dies  intestate  and  without  heirs.  In  the  several 
states  where  tenure  is  denied  to  exist,  it  is  assumed  that 
the  lands  are  held  by  the  owners  allodically  and  the  es- 
cheat is  the  result  of  the  statutes;  yet  the  holdings  can- 
not be  strictly  allodial,  for  all  the  titles  certainly  come 
from  the  state,  or  the  government,  and  an  allodial  hold- 
ing in  land  is  one  in  which  a  man  possesses  absolute 
ownership  in  his  own  right  without  owing  any  rent  or 
service  to  any  superior.  This  much  is  certain,  if  there 
is  any  tenure  between  the  owner  of  lands  in  fee  and  any 
other,  that  other  is  the  state;  for  the  Statute  of  Quia 
Emptores  is  in  force  prohibiting  subinfeudation ;  and  the 
state  has  taken  the  place  of  the  crown. 

If  we  take  the  position  that  no  tenure  exists  between 
the  owners  of  land  in  fee  and  the  state,  at  least  it  must 
be  remembered  that  some  of  the  rights  and  interests  in 
land  are  reserved  to  the  state;  such  for  instance,  as  the 
right  of  eminent  domain,  the  strictly  feudal  right  of  es- 
cheat and  certain  regulatory  rights  affecting  the  pub- 
lic welfare.  It  is  indisputable  also,  that  the  land  laws  in 
most  of  our  states  are  based  upon  the  common  law  of 
England,  which  holds  good  today,  except  as  modified  by 
our  statutes,  the  chief  innovation  being  the  establishment 
of  the  community  system  of  proi)erty  which  was  taken 
from  the  Spanish  law,  and  it  has  no  counterpart  in  the 
common  law  of  England.  Under  this  system  we  have  the 
separate  property  of  either  husband  or  wife,  which  in- 
cludes property  acquired  before  marriage,  or  property 
acquired  by  gift,  devise,  or  inheritance  after  marriage, 
and  the  community  property,  which  consists  of  property 


II 


I 


14 


Modern  Real  Estate  Practice 


acquired  by  either  or  both  after  marriage  by  onerous 
title,  as  it  is  spoken  of  legally,  meaning  property  acquired 
by  gift  or  inheritance.  In  Texas,  as  in  some  other  states, 
we  have  also  a  homestead  law,  which  is  purely  statutory 
and  not  of  common  law  origin.  Strictly  speaking,  a  home- 
stead is  not  an  estate  in  land,  but  a  right  additional  to 
and  independent  of  the  original  right  of  ownership.  It  is 
merely  an  artificial  estate  in  land  exempting  it  from  'the 
demands  of  creditors. 

Originally,  we  have  seen  that  all  tenure  was  by  knight 
service,  or  military.  Later  scutages,  or  assessments,  were 
allowed  instead  of  personal  military  services  and  from 
these  assessments  the  expenses  of  the  government  and 
the  mercenary  armies  were  paid.  In  England  these 
scutages  were  gradually  succeeded  by  subsidies  and  fi- 
nally by  the  land  tax,  which  latter  we  have  adopted  in 
the  United  States.  It  would  seem  at  first  that  our  tax 
on  land  is  in  reality  an  incident  to  the  feudal  tenure ;  but 
this  is  not  the  case.  Under  the  feudal  constitution,  the 
services  were  absolutely  a  condition  of  the  tenure,  im- 
posed by  the  sovereign  when  he  granted  the  feud,  and  if 
the  land  holder  did  not  live  up  to  his  obligations,  his  land 
escheated  to  the  state.  Taxation,  on  the  contrary,  is  not 
a  sovereign  power,  but  a  self  imposed  obligation  voted  by 
the  people  themselves  through  their  representatives,  for 
the  support  of  the  government;  and  though  land  taxes 
were  adopted  in  England  by  Parliament  in  order  to  take 
the  place  of  feudal  dues,  which  had  become  insufficient  to 
maintain  the  government,  they  were,  we  might  say,  a  gift 
from  the  people  to  the  crown,  rather  than  an  obligation 
imposed  by  the  crown.  Thus  in  England,  land  taxes,  in- 
stead of  being  an  incident  of  the  feudal  tenure,  grew  out 
of  the  insufficiency  of  the  feudal  system.  In  our  own 
country,  as  we  well  know,  our  taxes  are  self  imposed 
through  our  representatives  in  Congress.  It  is  true  that 
if  we  do  not  pay  our  taxes  the  government  can  get  execu- 
tion on  our  land  through  the  medium  of  the  courts ;  but 
when  we  get  title  from  the  state,  we  get  an  absolute  title 
in  fee  simple  without  any  conditions  as  to  payment  of 
taxes.  Escheat  to  the  state,  if  a  man  dies  intestate  and 
without  heirs,  is  the  only  incident  of  the  feudal  tenure 
remaining. 

Probably  one  of  the  most  distinctive  features  of  our 
land  laws  as  established  in  England  and  brought  to  this 
country  is  the  doctrine  of  estates,  by  which  the  duration 


1 


m . ' 


%      fi^ 


i 


!*• 


Dallas    School  of   Commerce 


15 


of  one's  right  of  possession  of  the  land,  with  the  incidental 
rights  of  user,  is  made  dependent  upon  the  character  of 
the  estate  or  interest  one  has  in  the  land.  In  every  piece 
of  land  there  is  an  estate  in  fee  simple  in  some  person, 
or  persons,  and  less  estates  may  be  created  in  favor  of 
others.  The  creation  of  a  less  estate  deprives  the  owner 
of  the  fee  simple  in  a  conveyance  inter  vivos  has  persisted 
though  the  estate  in  fee  simple  still  persists.  This  doc- 
trine of  estates  probably  owes  its  place  in  English  law  to 
the  feudal  tenures  by  which  the  tenant  was  regarded  as 
having  an  interest  in  land  which  was  short  of  actual 
ownership,  the  lord  having  a  possibility  of  the  land  re- 
verting to  him  by  reason  of  the  termination  of  the  ten- 
ant's interest,  which  presents  the  principle  of  the  present 
right  of  possession  in  one  person  and  the  right  or  possi- 
bility of  future  possession  in  another.  By  the  time  of 
Edward  I,  estates  had  become  to  a  certain  extent  dif- 
ferentiated so  that  there  were  three  of  them,  to  wit:  The 
fee  simple,  the  fee  tail,  and  the  estate  for  life.  They 
might  properly  be  called  feudal  estates  because  they  were 
the  estates  which  the  feudal  system  recognized  as  carry- 
ing with  them  feudal  dues  and  services,  depending,  of 
course,  upon  the  kind  of  tenure  under  which  they  were 
held.  They  are  commonly  called  freehold  estates.  In 
contrast  with  the  freehold,  or  feudal  estates,  are  the  es- 
tates less  than  freehold,  or  nonfeudal  estates.  These  are 
for  terms  of  years,  or  estates  at  will,  and  their  possession 
did  not  involve  any  feudal  dues.  In  fact,  they  were  not 
at  first  recognized  as  estates  under  the  feudal  system, 
and  the  tenant  at  will,  or  for  a  term  of  years,  had  no  pro- 
tection under  the  law.  Let  us  pause  here  a  moment  to 
point  out  a  characteristic  of  the  feudal  custom  which  is 
quite  at  variance  to  our  laws  governing  ownership  of 
lands. 

In  the  laws  governing  real  property  today,  the  most 
important  matter  is  ownership  as  distinguished  from 
possession.  Ownership  is  what  contributes  to  the  state  in 
the  way  of  taxes,  and  therefore,  ownership  is  protected. 
Possession  without  some  title  of  ownership  is  worthless, 
and  the  old  saying  that  "possession  is  nine  points  of  the 
law"  has  no  legal  force  today.  Under  the  feudal  consti- 
tution, it  was  quite  the  reverse.  The  feudal  estate  de- 
pended absolutely  on  the  rendering  of  services  by  the 
holders  of  land,  and  the  only  practical  way  of  determining 
who  was  responsible  for  these  services  was  to  look  to  the 
actual  physical  possession  of  the  land.    Whoever  was  in 


I- 


Il 


16 


Modern  Real  Estate  Practice 


Dallas   School  of  Commerce 


17 


possession  was  the  person  from  whom  the  feudal  dues  or 
services  might  be  exacted.  The  maintenance  of  the  state 
was  based  upon  the  services  or  dues  of  the  person  in 
possession  and  claiming  the  feudal  estate.  It  follows  in- 
evitably, therefore,  that  possession  was  protected  under 
the  feudal  system,  just  as  we  protect  ownership  today. 
Feudal  possession  was  called  seizen.  Even  at  this  day  we 
find  the  influence  of  this  feudal  idea  in  the  case  of  a 
squatter  on  a  piece  of  land,  who  by  fencing  and  using 
same,  and  paying  the  taxes  thereon  for  a  certain  number 
of  years,  varying  with  the  circumstances,  gets  a  defensible 
limitation  title  to  the  land. 

The  most  important  estate,  and  practically  the  only 
one  with  which  we  have  to  deal  in  the  business  of  real 
estate,  is  the  fee  simple.  From  the  purely  feudal  view- 
point, this  was  an  estate  which  passed  upon  the  death 
of  the  one  seized  of  it,  to  whoever  among  his  lineal  or 
collateral  relations  were  his  heirs  at  law;  and  when  that 
person  became  seized  in  his  turn  of  the  fee  simple  and 
died,  the  land  would  pass  in  the  same  way  to  his  heirs  at 
law.  An  estate  in  fee  simple  was  naturally  created  by 
this  form  of  gift:  "To  A  and  his  heirs."  The  phrase 
"and  his  heirs"  expressed  the  intent  that  A  and  his  heirs 
forever  were  to  enjoy  the  land.  In  the  earlier  feudal  pe- 
riod, when  the  fee  simple  was  inalienable,  its  chief  attri- 
bute as  an  estate  consisted  in  its  being  transmissible  by 
descent  to  that  relation  of  the  person  seized  who  was 
his  heir  at  law.  This  is  the  reason  for  the  rule  of  the 
feudal  land  law  that  the  use  of  the  word  "heirs"  was  abso- 
lutely necessary  to  create  a  fee  simple.  The  use  of  any 
other  expression  resulted  only  in  the  creation  of  an  estate 
for  life.  When  a  fee  simple  was  made  alienable  by  the 
Statute  of  Quia  Emptores,  every  free  man  was  enabled 
to  sell  his  land  at  his  pleasure ;  but  the  requirement  that 
the  word  "heirs"  was  absolutely  necessary  to  the  creation 
of  the  fee  simple  in  a  conveyance  inter  vivos  has  persisted 
down  to  modem  times,  and  is  seen  in  all  our  deeds  of  con- 
veyance in  use  today,  though  statutes  have  been  passed 
in  many  states  which  have  abolished  the  requirements, 
these  statutes  usually  providing  that  any  conveyance  shall 
operate  to  transfer  a  fee  simple,  unless  the  contrary  in- 
tent actually  appears.  An  estate  in  fee  simple  is  the  mod- 
em expression  of  the  holdings  of  a  freeman  under  the 
old  feudal  system. 

In  our  country,  we  also  have  what  are  designated  as 


i{' 


m       m 


life  estates.  Usually  life  estates  are  expressly  limited 
to  continue  during  the  lifetime  of  the  person 
taking  the  estate,  or  during  his  and  other  lives, 
or  during  the  lives  of  other  persons  alone.  Life 
estates  may  be  created  by  will,  or  by  conveyance, 
and  such  estates  are  called  conventional  life  estates;  or 
they  may  be  created  by  the  operation  of  the  law,  and  such 
estates  are  called  legal  life  estates.  Thus,  marriage  will 
often  give  both  spouses  life  interests  in  the  lands  of  each 
other,  though  no  express  contract  in  relation  to  such 
property  be  made.  An  example  of  this  is  seen  in  the  case 
where  a  man  marries  a  woman  possessing  a  home.  In 
case  of  her  death  he  would  have  a  life  interest  in  the 
home  so  long  as  he  occupied  it  as  a  home.  This  is  usually 
called  tenancy  by  courtesy.  In  like  manner,  upon  the 
death  of  the  husband  possessed  of  a  home  in  fee  simple, 
the  wife  would  have  a  life  interest  in  the  home  so  long  as 
she  occupied  it  as  such.  This  interest  is  called  a  dower 
right.  These  estates  created  by  operation  of  the  law% 
however,  are  really  not  genuine  estates,  but  are  a  life 
interest  in  the  property,  which  interest  cannot  be  con- 
veyed by  its  possessor.  Under  the  Texas  law  dower  and 
courtesy  estates  are  not  known  as  such,  but  the  common 
law  practice  above  mentioned  is  effective. 

In  addition  to  the  estate  in  fee  simple  and  the  life 
estate,  we  have  three  other  estates  which  it  would  do  well 
to  mention  in  this  treatise.  They  are  the  fee  simple  sub- 
ject to  a  condition  subsequent,  the  fee  simple  determin- 
able or  base  fee,  and  the  estate  in  fee  tail.  Under  the 
feudal  land  law,  it  has  been  permissible  from  the  earliest 
period  to  create  a  fee  simple  subject  to  a  condition  subse- 
quent upon  the  fulfillment  of  which  the  fee  simple  would 
come  to  an  end  and  the  creator  of  the  fee,  or  his  heirs, 
would  have  the  right  to  enter  and  make  a  forfeiture.  This 
right  of  entry  on  the  breach  of  the  condition,  being  a  valid 
future  interest  in  the  land.  A  modem  example  of  this 
kind  of  estate  is  found  when  a  property  is  sold  with  the 
condition  that  if  liquor  is  ever  sold  on  the  property,  it 
sTiall  revert  to  the  creator  of  the  fee.  A  fee  simple  de- 
terminable, or  base  fee,  is  a  fee  simple  created  to  last 
for  an  indefinite  time,  namely,  until  a  certain  event  should 
happen,  when  the  fee  reverts  ipso  facto  to  its  creator, 
whereas,  in  a  fee  subject  to  subsequent  conditions,  the 
fee  does  not  ipso  facto  come  to  an  end  upon  the  fulfill- 
ment of  that  condition,  but  does  so  upon  the  entry  of  the 
creator  of  the  estate  or  his  heirs.     In  this  country  we 


18 


Modern   Real  Estate  Practice 


i 


hi 


f  ii 


have  an  example  of  a  base  fee  where  a  gift  of  land  has 
been  made  to  a  charitable  corporation,  which  dissolves 
without  transferring  its  property,  for  with  the  dissolu- 
tion of  the  corporation,  the  fee  reverts  ipso  facto  to  the 
donor  or  his  heirs.  An  estate  in  fee  tail,  or  entailed  es- 
tate, may  be  defined  as  an  estate  of  inheritance,  which, 
if  left  to  itself  will,  after  the  death  of  the  first  owner  pass 
to  his  lawful  issue  so  long  as  his  posterity  endures,  and 
will  terminate  on  the  failure  of  such  posterity.  The  Stat- 
ute of  DeDonis,  passed  in  1285,  creating  the  estate  in  tail, 
was  enacted  in  the  interests  of  the  great  land  owners  who 
wished,  by  making  the  land  inalienable  in  the  hands  of 
successive  lineal  heirs,  to  perpetuate  their  estates.  Be- 
fore long,  this  resulted  in  an  intolerable  condition,  and 
many  ways  v/ere  evolved  by  which  an  estate  in  tail  could 
be  defeated.  In  England  even  now,  however,  by  what  is 
known  as  the  Strict  Settlement,  estates  are  entailed  and 
kept  in  the  family.  The  Strict  Settlement  provides  that 
during  each  generation  the  new  tenant  in  tail  shall  con- 
sent to  the  inalienability  of  the  estate,  and  in  all  well  reg^a- 
lated  English  families  the  new  tenant  in  tail  does  not  re- 
fuse. In  our  country  estates  in  tail  have  practically  fal- 
len into  disuse  ,though  they  are  still  recognized  in  a  form 
modified  by  statutory  enactments.  We  find  for  example, 
that  it  is  provided  in  some  states  that  language  which 
form.erly  created  an  estate  in  tail  shall  be  held  to  create 
a  fee  simple,  while  in  others  that  by  such  language,  a  life 
estate  only  will  be  created  in  the  first  donee  in  tail,  and 
the  heirs  of  the  body  of  such  donee  take  the  remainder  as 
fee  simple.  The  statutes  in  other  states  enable  the  ten- 
ant in  tail  to  bar  the  entail  by  a  conveyance  in  fee  simple. 
These  three  last  mentioned  are,  as  has  been  suggested, 
seldom  met  with  in  the  actual  business  of  real  estate,  and 
for  the  purposes  of  this  discussion  are  unimportant. 

As  we  have  pointed  out,  an  estate  in  land  signifies 
an  interest  in  the  land.  Estates  in  fee  simple  and  life  es- 
tates are  called  free  hold  estates ;  and  real  property  strict- 
ly speaking,  is  an  interest  in  land  amounting  to  a  freie 
hold.  Estates  that  are  less  than  free  hold  estates  are 
properly  not  estates  at  all,  but  are  regarded  as  a  part  of 
one's  personal  possessions,  and  are  called  chattel  inter- 
ests, or  leasehold  estates,  being  originally  created  bv  an 
instrument  called  a  lease.  In  this  discussion,  therefore, 
which  interests  itself  only  in  real  property,  we  have  no 
place  for  estates  less  than  free  hold. 

Having  traced  the  history  and  development  of  real 


Dallas    School   of   Commerce 


19 


I-' 


-  '"^ 


^r 


r 


property  from  its  earliest  beginning  down  to  the  present 
day  holdings,  our  subject  is  properly  ended.  Real  prop- 
erty is,  of  course,  the  foundation  on  which  all  subjects 
relative  to  the  real  estate  business  must  be  builded  and 
all  other  subjects  which  will  be  studied  in  this  course  are 
supplemental  to,  and  are  developed  from,  holdings  in  real 
property.  It  is,  therefore,  of  supreme  importance,  both 
from  a  practical  and  cultural  point  of  view  that  we  under- 
stand the  meaning  of  real  property.  This  we  have  tried 
to  show  through  its  historical  development  and  it  is  hoped 
that  we  have  accomplished  that  purpose. 

In  conclusion,  let  us  repeat  that  the  sense  of  private 
ownership  is  one  of  the  earliest  and  most  fundamental  of 
all  human  instincts.  And  it  is  an  instinct  which  has 
worked  for  the  good  of  all  mankind,  for  the  progress  of 
society  has  ever  been  connected  with  private  ownership, 
and  particularly  ownership  of  land.  No  nation  has  ever 
grown  and  remained  strong  and  virile  where  the  land 
has  rested  in  the  hands  of  a  few.  Land  means  a  home 
and  a  fireside  and  men  fight  for  their  home  and  their 
fireside.  Henry  Clay  once  said  "when  a  man  becomes 
the  owner  of  his  home,  a  new  patriot  is  bom  to  the  na- 
tion." And  there  is  nothing  more  true  than  this.  So 
when  a  realtor  sells  a  man  a  home,  he  has  the  double 
satisfaction  of  having  served  both  himself  and  his  coun- 
try. 


Dallas   School  of   Commerce 


21 


r. 


u  ■■ 


'   I 


HISTORY  AND  DEVELOPMENT  OF  LEASES 


By  Frank  L.  McNeny. 

A  lease  is  a  grant  of  exclusive  possession  for  a  defi- 
nite term.  It  is  an  agreement  whereby  an  owner  yields 
possession  of  land  and  improvements  for  a  certain  term 
in  consideration  of  rents  reserved,  and  the  tenant  ac- 
cepts possession  under  certain  conditions  and  covenants. 

The  owner  of  the  property  is  called  the  lessor.  The 
tenant  is  called  the  lessee.  Rent  is  the  money  or  other 
thing  of  value  paid  by  lessee  to  lessor  for  the  use  of  the 
property.  The  thing  that  makes  it  profitable  to  own  land 
or  buildings  in  excess  of  what  one  can  actually  use  for 
his  own  business  is  his  ability  to  rent  or  lease  them  at  a 
fair  return  on  their  value.  So  the  question  of  rent  alone 
in  the  final  analysis  fixes  the  values  of  real  estate.  There 
are  other  factors  which  temporarily  have  a  bearing  on 
the  value,  but  ultimately  rent  is  the  yardstick  by  which 
all  real  estate  values  are  measured,  and  real  estate  rep- 
resents 60  per  cent  of  the  wealth  of  the  nation. 

Roman  Origin. 

The  practice  of  leasing  extends  back  to  the  early  Ro- 
man empire.  The  rulers  of  the  empire  exercised  absolute 
control  over  all  of  the  land  and  apportioned  it  out  among 
a  favored  few  of  the  nobility.  These  became  the  land- 
lords of  that  day  and  generation  and  it  is  assumed  that 
this  is  where  the  term  "landlord"  originated. 

These  landlords  having  large  areas  which  they  were 
not  able  to  cultivate  or  realize  a  profit  from,  devised  a 
system  of  hiring  the  land  out  to  the  less  fortunate  ones. 
It  is  both  interesting  and  surprising  to  know  how  like  our 
modem  day  leases  were  the  original  documents  by  which 
the  land  was  turned  over  to  others  for  cultivation.  The 
Romans  had  a  long  term  lease  called  emphyteusis  and  a 
tenancy  at  will  lease  called  precarium.  This  last  corre- 
sponds with  our  month  to  month  occupancy.  These  docu- 
ments occupied  to  some  extent  the  place  of  the  landlord 
and  tenant  law  of  our  present  system.  In  those  days  the 
tenant  was  called  the  conductor  and  the  landlord  was 
called  the  locator.  The  landlord  alone  could  sue  in  respect 
of  the  land  but  the  tenant  had  a  personal  action  against 
the  landlord  on  the  contract.    The  landlord  was  account- 


22 


Modern  Real  Estate  Practice 


Dallas   School  of  Commerce 


23 


able  for  any  injury  to  the  tenant  arising  from  the  de- 
fective condition  of  the  premises.  Under  the  law  or  cus- 
tom of  that  day  the  landlord  must  permit  the  tenant  to 
carry  away  not  only  moveables  but  even  fixtures  placed 
by  the  tenant,  provided  removing  the  same  did  not  in- 
jure the  building.  A  tenant  of  land  was  entitled  to  com- 
pensation for  unexhausted  improvements  except  such  as 
he  had  specifically  agreed  to  construct  in  consideration  of 
lower  rent. 

English  Feudal  System. 

Our  system  of  leasing  came  to  us  more  directly,  of 
course,  from  England  where  a  similar  situation  existed 
and  does  exist  to  this  date  with  reference  to  the  land. 
The  English  system  is  a  product  of  the  old  feudal  system 
of  land  titles  as  practiced  in  England,  France  and  Ger- 
many in  the  early  centuries.  The  king  apportioned  all 
land  to  the  dukes,  earls  and  marquises  for  a  nominal  rent 
amounting  to  practically  nothing,  probably  a  book,  sword, 
or  lance,  or  a  sheaf  of  wheat.  Of  course  not  knov^^ing 
how  or  caring  to  cultivate  the  soil,  they  in  turn  subdivided 
these  vast  holdings  and  leased  to  the  barons  who  in  turn 
subdivided  still  further  and  leased  to  the  knights  and 
landed  gentry,  and  they  to  the  yeomen,  and  the  yeomen 
to  the  serfs,  who  actually  cultivated  the  land,  and  as  the 
use  of  this  land  passed  on  down  from  each  overlord,  the 
rental  named  was  any  amount  that  particular  overlord 
desired  to  prescribe,  and  in  addition  to  the  rent  he  exacted 
whatever  military  service  he  chose.  This  condition  con- 
tinued from  the  time  of  the  Norman  conquest  in  1066 
through  the  reign  of  William  the  Conqueror  and  until  the 
War  of  the  Roses  overturned  the  feudal  system  in  1485, 
seven  years  before  the  discovery  of  America,  but  the 
skeleton  of  that  system  is  still  to  be  found  in  the  present 
landlord  and  tenant  law  of  England. 

In  England  today  the  ownership  of  all  land  is  in  the 
king  and  the  highest  interest  recognized  in  any  individual 
is  an  estate  in  fee  simple,  which,  according  to  the  En$:- 
lish  law  is  merely  a  tenancy.  Custom,  however,  has  made 
it  practically  an  ownership.  The  vast  majority  of  the 
land  in  England  is  still  cultivated  by  men  who  do  not  own 
it.  The  real  root  of  the  present  discontent  is  the  absolute 
dominion  of  the  class  of  owners  who  are  not  cultivators, 
but  who,  having  the  monopoly  of  the  land,  may  impose 
on  the  tenants  whatever  burdens  they  please. 


• 


k 


if 


r> 


It  was  in  England,  however,  that  leasing  became  re- 
fined and  very  much  in  vogue,  and  much  was  done  to  bet- 
ter the  condition  of  the  lessee,  notably  during  the  reigns 
of  Henry  Vll  and  Henry  VIII,  in  the  latter  part  of  the 
fourteenth  and  early  part  of  the  fifteenth  centuries,  and 
from  that  time  on  leasing  has  flourished  and  been  popular 
in  England. 

So  far  as  we  know,  England  is  responsible  for  the  99- 
year  lease.  Just  why  for  99  years  has  never  been  ascer- 
tained, but  there  was  a  general  practice  to  lease  land  for 
three  generations,  and  a  generation  Vv^as  considered  to  be 
thirty-three  years,  and  so  it  assumed  this  is  where  the 
system  originated.  Then,  too,  it  is  beheved  there  was  an 
old  English  common  law  which  prevented  the  leasing  of 
land  for  a  longer  period  than  100  years,  and  so  99  years 
came  within  the  law. 

Development  of  the  Lease  in  America. 

The  evolution  of  the  lease  in  America  has  wrought 
few  changes  except  in  long  term  leases,  Vvliere  totally  dif- 
ferent and  rapidly  changing  conditions  have  made  neces- 
sary numerous  covenants  for  the  protection  of  both  lessor 
and  lessee.    These  we  will  discuss  later. 

The  lease  form  in  common  use  throughout  this  coun- 
try today  is  a  brief  and  simple  document.  A  perusal  of  it 
of  it  by  a  casual  observer  would  very  probably  lead  to  the 
conclusion  that  it  is  a  one-sided  instrument  in  favor  of  the 
landlord,  but  on  closer  reading  it  will  be  found  that  the 
requirements  of  the  tenant  are  just  and  fair.  The  cove- 
nants for  the  most  part  refer  to  the  duties  of  the  tenant 
for  the  reason  that  under  the  terms  of  the  lease  the  land- 
lord is  only  required  to  do  one  thing  as  a  rule,  and  that 
is  to  yield  possession  of  the  premises  for  a  given  time. 

Legal  Restrictions. 

Fortunately,  the  making  of  leases  is  not  hedged  about 
by  a  lot  of  legal  restrictions.  The  laws  of  the  country 
have  left  it  largely  to  the  contracting  paii;ies  to  make 
their  own  agreements  with  reference  to  contractual  obli- 
gations and  the  law  concerns  itself  m.erely  with  the  en- 
forcing of  these  agreements.  This  is  as  it  should  be. 
Man  should  be  left  largely  free  to  make  contracts  of  his 
own  choosing  with  reference  to  his  land  and  holdings,  and 
it  is  the  province  of  the  law  to  see  that  these  contracts 
are  enforced.    No  law  can  be  better  than  that. 


II 


24 


Modern  Real  Estate  Practice 


However,  there  are  one  or  two  outstanding  exceptions 
in  this  country.  By  statutory  enactment  in  Maryland,  a 
lease  for  a  period  of  longer  than  fifteen  years  becomes 
redeemable  after  five  years,  at  the  option  of  the  lessee. 
This  law  seems  to  have  been  the  result  of  an  aversion 
against  long  time  leases  in  that  state. 

In  the  state  of  New  York  there  is  a  law  which  taxes 
as  personal  property  the  rental  returns  from  any  lease 
of  longer  duration  than  twenty-one  years.  So  the  ex- 
pedient has  been  adopted  of  writing  the  leases  for  twenty- 
one  years  with  covenants  and  conditions  with  reference  to 
renewals. 

Term  of  Lease. 

There  is  no  limit  to  the  term  of  a  lease  as  a  matter  of 
law.  It  can  be  made  for  a  term  of  one  year  or  for  nine 
hundred  and  ninety-nine  years.  Most  leases  are  made 
for  a  period  of  from  one  to  ten  years.  Some  extend  up  to 
twenty-five  years  and  some  few  up  to  fifty  years.  These, 
in  addition  to  what  is  commonly  known  as  the  ninety- 
nine-year  lease,  and  of  which  we  shall  treat  later. 

Created  Verbally  and  in  Writing. 

A  lease  for  one  year  may  be  created  verbally,  but  for 
a  longer  period  than  one  year  must  be  in  writing.  Like 
all  other  contracts,  a  lease  should  clearly  indicate  the  pai^- 
ties  to,  and  the  effect  of  the  contract.  It  should  contain 
sufficient  description  of  the  premises,  words  appropriate- 
ly expressing  the  demise,  the  date  on  which  the  term 
is  to  begin,  and  end,  the  rent  reserved,  and  how  it  is  to 
be  paid,  the  usual  clause  with  reference  to  the  care  of  the 
property,  repairs,  assignment,  default,  liability,  fire,  hold- 
over and  any  special  clauses  agreed  upon. 

The  landlord's  interest  in  the  rent  remains  real  prop- 
erty, but  the  tenant's  interest,  no  matter  how  long  the 
lease  may  be,  remains  personal  property. 

Assignment. 

A  tenant's  right  in  a  lease  may  be  assigned  unless 
there  is  an  express  provision  in  the  lease  to  the  effect 
that  it  cannot  be  assigned  without  the  consent  of  the 
lessor.  If  the  landlord  wants  to  protect  himself  not  only 
against  his  tenant  assigning,  but  against  all  assignments 
subsequent  to  the  first,  he  must  make  express  provision 
not  only  that  the  tenant  shall  not  assign,  but  no  subse- 
quent assignee  shall  assign. 


V       f    / 


'h 


Q 


Dallas   School   of   Commerce 


25 


\  I 


Obligations  of  Landlord  and  Tenant. 

The  landlord's  obligation  is  to  protect  the  tenant  in 
the  possession  of  the  property  which  he  has  leased  him. 
He  must  warrant  and  defend  the  title  to  possession 
against  any  adverse  claimants.  The  tenant's  obligation 
is  to  protect  his  landlord's  interest  and  give  him  prompt 
notice  of  all  matters  which  affect  that  interest  of  which 
he  learns  by  reason  of  his  occupancy.  The  tenant  must 
be  loyal  to  his  landlord  and  is  liable  for  damage  if  he  is 
not. 

Rental  Payments  and  Holdover* 

The  lease  is  usually  fixed  upon  the  basis  of  an  annual 
rental  payable  in  monthly  installments  in  advance  and  the 
lease  ends  of  its  own  force  without  notice,  on  the  date 
specified.  If  there  be  a  holdover  on  the  part  of  the  ten- 
ant, and  nothing  be  said  on  either  side,  the  presumption 
is  that  he  is  a  holdover  as  an  annual  tenant  upon  the  same 
terms  as  the  former  lease.  The  relation  having  been  en- 
tered into  and  the  rent  accepted,  the  landlord  will  be 
bound  for  another  yearly  term.  Therefore  for  the  pro- 
tection of  the  landlord,  there  should  be  a  clause  in  every 
lease  to  the  effect  that  any  holdover  under  the  lease  will 
be  regarded  as  a  month  to  month  occupancy  at  the  high- 
est monthly  rental  named  in  the  lease  contract. 

Termination  of  Leases. 

Except  at  the  end  of  the  term  stipulated  in  the  lease, 
leases  may  be  terminated  by  a  voluntary  offering  of  sur- 
render on  the  part  of  the  tenant  and  a  voluntary  accept- 
ance of  that  offer  by  the  landlord.  Under  such  circum- 
stances all  obligations  on  the  part  of  both  landlord  and 
tenant  are  ended.  The  tenant  is  liable  for  rent  up  to  the 
time  of  surrender,  but  not  beyond  that. 

Unless  there  is  a  provision  in  the  lease  that  if  the 
property  becomes  vacant  the  landlord  may  resume  pos- 
session for  the  account  of  the  tenant,  renting  the  property 
to  the  best  advantage  and  crediting  the  tenant  therewith, 
but  charging  him  rent  up  to  the  end  of  the  terms,  it  may 
be  implied  from  the  act  of  the  landlord  in  taking  pos- 
session of  the  property  when  the  tenant  leaves  it  vacant, 
that  there  has  been  an  offer  of  surrender  by  the  tenant 
and  acceptance  by  the  landlord.  Landlords  who  have 
taken  possession  of  property  in  order  to  protect  it  from 
depredation,  have  found  themselves  in  the  position  of 
having  accepted  surrender  of  the  property.    A  verbal  sur- 


26 


Modern  Real  Estate  Practice 


render  and  acceptance  is  sufficient,  for  it  is  not  varying 
the  terms  of  the  written  instrument,  but  is  the  Hmitation, 
or  ending,  of  an  obligation. 

Dispossessing  a  Tenant. 

A  landlord  can  dispossess  his  tenant  and  get  summary 
possession  of  his  property  for  three  causes. 

First,  if  the  tenant  holds  over  after  the  expiration  of 
the  term. 

Second,  for  non-payment  of  either  rent,  taxes  or  water 
rents,  if  the  tenant  has  covenanted  to  pay  these  charges. 

Third,  for  unlawful  use  of  the  premises. 

For  any  other  breach  of  the  covenants  of  the  lease,  a 
landlord  is  not  entitled  to  a  summary  dispossession,  but 
must  sue  his  tenant  for  ejectment  under  the  lengthy  pro- 
cess of  action  in  court.  In  order  to  obviate  that  necessity, 
important  leases  are  often  drawn  in  such  manner  that 
all  conditions  of  the  lease  which  call  for  payments  of  any 
sort  by  the  tenant  are  put  in  such  form  that  those  pay- 
ments if  they  become  owing,  are  made  additional  rent. 
For  instance,  if  the  tenant  should  be  required  to  make  re- 
pairs, or  to  comply  with  orders  of  municipal  departments 
and  fail  to  do  so,  the  landlord  is  at  liberty  to  do  these 
things,  and  these  payments  thereupon  become  additional 
rent,  collectable  with  and  in  the  same  manner  as  the  fixed 
rental. 

Repairs. 

Unless  it  be  expressly  covenanted  in  the  lease,  there 
is  no  obhgation  on  the  part  of  the  landlord  to  do  anjrthing 
in  the  matter  of  repairs.  It  is  usually  customary,  how- 
ever, to  keep  the  roof  in  condition.  All  that  is  required 
of  the  landlord  is  to  let  the  tenant  occupy  the  premises. 
The  tenant  has  a  general  obligation  to  permit  no  waste 
upon  the  premises,  but  is  not  obligated  to  make  perma- 
nent repairs.  He  can  let  the  premises  go  along  in  ordi- 
nary wear  and  tear  until  they  are  worn  out.  The  tenant 
is  usually  required  to  pay  his  own  water  rent,  light  and 
heat  bills,  except  that  these  things  are  always  furnished 
in  office  buildings,  and  heat  is  furnished  in  large  apart- 
ment buildings  with  heating  plants. 

In  Case  of  Fire. 

The  usual  fire  clause  provides  that  in  case  of  fire  the 
tenant  is  to  give  notice  thereof  immediately  to  the  land- 
lord, who  shall  cause  the  damage  to  be  repaired  as  speed- 


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Dallas    School   0/   Commerce 


27 


ily  as  possible.  If  the  damage  be  so  extensive  as  to  ren- 
der the  premises  untenantable,  the  rent  shall  abate  until 
such  time  as  the  premises  shall  have  been  put  in  proper 
repair,  and  thereafter  the  tenant  shall  again  pay  the  rent 
and  have  no  obligation  of  cancelling  the  lease.  If,  how- 
ever, the  building  be  totally  destroyed,  the  rent  shall  be 
paid  up  to  the  time  of  the  fire,  and  then  and  from  thence- 
forth the  lease  shall  cease. 

Liability. 

All  leases  should  contain  a  liability  clause  wherein  the 
lessee  agrees  to  indemnify  the  lessor  and  save  him  harm- 
less from  any  and  all  damages  to  person  or  property 
arising  or  growing  out  of  the  occupancy  or  repairing  of 
said  property,  or  caused  by  the  neglect  of  any  tenant  on 
the  demised  premises  or  due  to  the  building  or  any  part 
thereof  being  improperly  constructed. 

Ninety-Nine-Year  Leases. 

In  the  last  fifty  years  there  has  grown  up  in  this 
country  a  decided  tendency  toward  long  term  or  ninety- 
nine-year  leases.  In  these  instruments  the  lease  has 
probably  reached  its  highest  state  of  perfection,  for  great 
care  and  thought  has  been  given  them  in  trying  to  pro- 
tect property  against  all  the  contingencies  which  may 
arise  over  such  a  long  period.  In  some  sections  they  are 
called  ground  leases  because  most  frequently  the  ground 
is  leased  and  the  lessee  is  required  to  erect  a  substantial 
improvement  within  a  given  time.  Then,  too,  the  rent  is 
usually  based  on  a  net  return  of  5  per  cent  or  6  per  cent 
on  the  ground  value.  Of  course  it  is  impossible  to  deter- 
mine what  the  ground  value  will  be  over  such  a  period, 
and  so  the  lease  usually  provides  for  two  or  three  gradua- 
tions in  rent,  or  for  re-appraisals  of  the  property  at  given 
intervals. 

There  are  many  advantages  to  both  lessor  and  lessee 
in  ninety-nine-year  leases  and  this  is  why  they  are  re- 
garded as  safe  and  just.  The  business  man  who  wants  a 
home  for  his  business  is  enabled  under  a  lease  of  this 
character  to  rent  the  land  at  the  same  rate  of  interest 
which  he  would  have  to  pay  for  borrowed  money  to  make 
an  outright  purchase,  and  can  therefore  keep  this  money 
in  his  business,  or  use  it  with  which  to  erect  a  new  home 
for  his  business  on  the  lot  which  he  leases.  In  this  way 
one  is  enabled  to  borrow  capital  direct  from  the  owner  of 


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Modern  Heal  Estate  Practice 


Dallas   School  of   Commerce 


29 


the  land  and  pay  interest  on  the  investment  in  the  form 
of  rent. 

While  the  graduations  in  rent  reserve  to  the  owner 
a  portion  of  the  enhanced  value  which  will  accrue  to  the 
property,  the  lessee  justly  receives  his  fair  proportion  of 
this  increment.  He  takes  the  chance  usually  of  going  into 
a  new  district  and  spending  large  sums  of  money  for  the 
improvement  which  he  is  required  to  make,  and  thus  im- 
proving and  helping  to  create  a  new  district,  he  is  entitled 
to  his  reward. 

Any  number  of  cases  can  be  shown  where  a  far-sighted 
merchant  has  leased  a  larger  piece  of  ground  that  was 
necessary  for  his  business,  improved  it  with  a  nice  build- 
ing in  keeping  or  probably  ahead  of  the  district  in  which 
it  was  located,  sub-leased  that  portion  which  he  did  not 
desire  for  his  own  business,  and  through  the  increase  in 
value  has  more  than  made  his  rent  free. 

But  let  it  not  be  understood  that  all  the  advantages 
of  a  long  lease  accrue  to  the  lessee.  Far  from  it.  Take 
the  owner  of  a  valuable  piece  of  property  down-town,  who 
has  not  the  money  with  which  to  properly  improve  it  and 
does  not  want  to  borrow  the  money.  By  leasing  it  to  re- 
sponsible parties,  the  owner  gets  an  improvement  erected, 
enhances  the  value  of  his  land,  increases  his  rent,  and  in 
so  doing  acquires  a  magnificent  investment,  as  a  choice 
piece  of  city  property  under  long  term  lease,  appropriate 
improvements  having  been  already  erected  to  secure  the 
lease,  is  considered  one  of  the  best  investments  procur- 
able anywhere. 

Some  times  an  o\Mier  prefers  to  lease  rather  than  sell 
for  the  reason  that  liquid  assets  are  dangerous.  If  he 
sells  and  converts  his  property  into  cash  and  notes,  he 
might  not  be  as  fortunate  in  the  selection  of  another  in- 
vestment. The  funds  might  be  invested  in  the  stock  of 
some  individual  concern  depending  upon  individual  man- 
agement which  might  not  always  return  a  good  rate  of  in- 
come. Under  his  lease,  however,  he  is  always  assured 
of  a  good  income,  retains  the  title  to  his  land,  and  can,  of 
course,  sell  it  at  any  future  time. 

Frequently  an  o\sTier  wants  to  provide  for  the  main- 
tenance and  education  of  his  children.  By  placing  a  long 
term  lease  on  his  land  he  can  provide  that  the  adminis- 
trator or  trustee  of  his  estate  shall  collect  the  rentals  and 
apply  them  to  the  needs  of  the  children  as  they  grow  up. 
When  the  children  become  of  age,  they  can  dispose  of  the 


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fee  and  divide  the  proceeds  as  their  interest  appears.  No 
lesser  authority  than  Blackstone  approved  of  long  term 
leases,  stating  that  they  enabled  owners  to  make  settle- 
ments on  their  children  and  also  enabled  them  to  borrow 
money  without  disturbing  the  fee  to  the  land.  Of  course 
when  a  lease  is  made  requiring  the  lessee  to  make  a  sub- 
stantial improvement,  the  owner  is  in  effect  borrowing 
the  money  from  the  lessee  with  which  to  improve  the 
property,  without  giving  a  mortgage  or  lien  of  any  kind 
on  the  land. 

One  of  the  greatest  advantages  to  the  lessor  is  the  fact 
that  he  is  relieved  of  the  paying  of  taxes,  insurance,  and 
all  kind  of  carrying  charges,  repairs  and  alterations.  But 
so  much  for  the  advantages  to  the  owner. .  They  might 
be  continued  ad  infinitum. 

In  addition  to  all  of  the  clauses  of  a  short  term  lease 
there  should  be  inserted  in  a  ninety-nine-year  lease  a 
clause  making  the  lease  a  net  one,  providing  that  the 
lessee  shall  pay  all  taxes  and  assessments  of  every  kind 
and  character  against  the  property,  excepting  only  in- 
come and  inheritance  taxes. 

There  should  be  a  clause  providing  for  the  erection  of 
the  contemplated  improvements  within  the  time  agreed 
upon  and  this  clause  or  another  should  also  provide  that 
the  lessee  shall  deposit  with  the  lessor  sufficient  security 
to  guarantee  the  erection  of  the  improvements,  the  se- 
curity to  be  returned  to  the  lessee  after  the  improvements 
are  completed,  free  from  all  liens. 

The  fire  clause  should  provide  that  the  building  be 
kept  insured  in  responsible  insurance  companies  to  the  ex- 
tent of  80  per  cent  of  its  value,  and  that  the  policies  be  de- 
posited in  a  bank  or  trust  company  of  lessors  choice.  The 
payments  under  the  policies,  if  any,  are  to  be  available  to 
the  lessee  upon  architect's  estimates  for  restoring  the  de- 
stroyed building,  and  in  the  event  the  insurance  money  is 
not  sufficient,  the  remainder  must  be  paid  by  the  lessee. 

The  clause  in  most  ninety-nine  year  leases  referring 
to  the  payment  of  rent,  requires  that  the  same  shall  be 
paid  in  **gold  coin  of  the  United  States  of  America,  of  the 
present  standard  of  weight  and  fineness,  or  its  equiva- 
lent in  other  legal  tender."  This,  to  my  way  of  thinking, 
is  distinctly  wrong.  There  is  no  reason  why  the  lessee 
should  guarantee  that  the  value  of  the  American  dollar 
will  always  remain  the  same.  Under  such  a  lease  if  the 
American  dollar  should  decline  as  low  as  the  British 


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Modern  Real  Estate  Practice 


Dallas   School  of   Commerce 


31 


Mi 


pound  did  recently,  the  lessee  would  be  paying  practically 
double  the  rental  he  contracted  to  pay.  The  clause 
should  read  that  the  rent  is  payable  "in  lawful  money  of 
the  United  States  of  America."     This  is  fair  to  both 

parties. 

In  conclusion,  let  me  call  your  attention  again  to  the 
fact  that  a  lease  is  a  contract  by  which  a  return  is  paid 
on  more  than  half  of  the  invested  capital  of  this  country, 
as  real  estate  represents  more  than  50  per  cent  of  the 
wealth  of  the  nation.  Therefore,  too  much  care  and 
thought  cannot  be  given  to  the  proper  preparation  of 
leases. 

Duties  of  a  Realtor. 

It  is  the  duty  of  a  realtor  to  properly  present  the 
property  of  his  client,  the  owner,  to  every  prospective 
tenant,  and  to  use  every  legitimate  means  of  securing  a 
desirable  occupant  for  the  property  at  the  very  best  price 
the  market  will  bear.  If  he  is  a  well-posted  realtor  he 
has  made  a  careful  and  thorough  study  of  basic  condi- 
tions and  the  various  elements  that  enter  into  the  sale  and 
rental  value  of  real  estate,  he  has  studied  the  arteries  of 
traffic,  the  congested  districts,  the  transportation  fa- 
cilities, the  various  sectional  developments,  and  the  nu- 
merous other  things  that  bear  directly  or  indirectly  upon 
realty  values,  and  so  he  is  in  position  to  present  his  prop- 
osition in  a  scientific  manner.  If  a  lease  is  consummated 
it  is  his  further  duty  to  see  that  every  interest  of  his 
client  is  properly  safeguarded.  For  this  service  the 
realtor  receives  a  commission  based  on  the  amount  of  the 
rental.  The  schedule  of  commission  varies  in  different 
sections  of  the  country  but  on  a  ten-year  lease,  for  in- 
stance, it  usually  amounts  to  about  2  per  cent  of  the  ag- 
gregate rental.  This  charge,  however,  does  not  include 
monthly  collections. 


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REAL  ESTATE  ADVERTISING 


By  Lawrence  Miller 

We  shall  not  attempt  to  go  extensively  into  the  tech. 
nique  of  advertising.  This  is  a  big  subject  in  itself,  an^ 
the  writer  is  not  an  Advertising  Expert,  but  a  Real  Es« 
tate  Broker.  So  our  subject  will  be  confined  to  Why, 
How,  What  and  Where  to  Advertise  Real  Estate. 

Let  us  first  answer  two  direct  and  simple  questions: 
What  is  Real  Estate?  and  Why  Advertise? 

Real  Estate,  broadly  and  briefly  speaking,  is  Land 
and  Buildings.  It  may  be  a  hundred-thousand-acre  ranch 
or  a  forty-acre  farm ;  it  may  be  wholesale  or  retail  busi- 
ness property,  an  office  building  or  a  warehouse,  a  va- 
cant lot  in  an  outlying  addition  or  a  building  site  on  the 
boulevard;  it  may  be  a  bungalow,  a  palatial  home,  or  an 
apartment  house.  Its  value  may  be  Two  Hundred  Dol- 
lars or  a  Million. 

Now,  all  the  land  in  all  the  world  is  parcelled  out  and 
belongs  to  someone.  Portions  of  it  are  owned  by  states 
and  nations,  but  most  of  it  is  owned  by  individuals,  or 
groups  of  individuals.  How  was  this  individual  owner- 
ship of  most  of  the  earth's  land  area  acquired?  In  one 
of  three  ways:  by  gift,  by  inheritance,  or  by  purchase. 
If  you  own  a  piece  of  real  estate,  it  was  given  to  you,  or 
left  you  by  someone  who  died,  or  you  bought  it  from  some- 
body else.  If  you  acquired  title  by  purchase,  it  was  prob- 
ably through  a  real  estate  broker — or  Realtor,  as  every 
member  of  a  local  board  affiliated  with  the  National  Asso- 
ciation of  Real  Estate  Boards  is  now  known — and  perhaps 
you  were  attracted  to  the  particular  property  through  an 
advertisement. 

Which  leads  us  to  venture  an  answer  to  our  second 
question,  "Why  Advertise?"  Simply  to  call  to  the  atten- 
tion of  the  greatest  number  of  possible  or  probable  pur- 
chasers, in  the  quickest  and  most  effective  w^ay,  a  certain 
piece  of  property  which  is  offered  for  sale  or  lease. 

Before  proceeding  to  a  discussion  of  HOW  to  adver- 
tise, let  us  stop  and  consider  what  MOTIVES  people  have 
for  buying  real  estate.    They  buy: 


32 


Modern  Real  Estate  Practice 


Dallas   School   of   Commerce 


33 


1.  With  the  hope  or  expectation  that  they  will  make 
money  or  save  money,  or  perhaps  do  both ; 

or  2.    For  a  home; 

or  3.    For  the  location  of  a  business  or  industry ; 

or  4.    For  investment ; 

and  sometimes,  to  protect  a  property  already  owned, 
or  to  provide  for  present  or  future  expansion. 

So,  in  writing  an  advertisement  of  a  particular  piece 
of  property,  appeal  to  the  motive  or  motives  which  will 
most  likely  challenge  the  interest  of  a  prospective  pur- 
chaser, prompt  him  to  go  to  the  telephone  and  say,  "I 
would  like  to  see  the  property  you  are  advertising  in  this 
evening's  paper."  Read  your  ad  before  you  write  it! 
That  may  sound  absurd,  but  what  is  meant  is  this :  Put 
yourself  mentally  in  the  place  of  a  prospective  customer ; 
then  write  into  your  advertisement  all  the  information 
which  you  as  a  buyer  would  like  to  know  and  that  would 
create  in  you  the  desire  to  own  the  particular  property 
advertised. 

The  manufacturer  of  a  patent  weather  strip  launched 
his  product  with  enthusiastic  copy  and  sales  talk  about 
the  cleanliness  and  warmth  of  the  "weather-tight  home." 
But  people  did  not  buy.  Then  he  changed  his  approach 
and  pictured  a  house  where  dust  and  disease-laden  floor 
drafts  constantly  THREATENED  THE  HEALTH  OF 
THE  CHILDREN.  Immediately  sales  picked  up.  Uncon- 
sciously he  had  reclassified  his  product  and  changed  the 
basis  of  his  appeal  from  a  lower  to  a  higher  motive.  He 
secured  extra  expenditure  from  his  prospects  by  making 
them  feel  the  disadvantage,  the  danger,  of  being  without 
his  product.  His  former  appeal  to  mere  comfort  and 
pride  had  nothing  like  the  selling  force  of  this  appeal  to 
the  more  potent  motives  of  caution  and  parental  love. 

So,  it  is  important  in  writing  copy  for  real  estate  or 
any  other  kind  of  advertising  to  make  your  appeal  to  the 
most  potent  motives  one  could  have  for  buying  the  prop- 
erty or  the  product  advertised. 

Now,  if  your  advertisement  has  honestly  stated  the 
facts,  has  given  sufficient  information  to  present  a  cor- 
rect mental  picture  of  the  property,  and  is  clear  as  to 
price  and  terms,  your  sale  is  half  made  when  the  reader 
of  the  advertisement  asks  to  be  shown  the  property.  If 
on  inspection  your  customer  finds  that  the  advertisement 
has  understated  rather  than  overstated  its  attractiveness 


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f    WL        « 


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and  advantages,  you  have  made  a  sale.  If,  on  the  other 
hand,  the  advertisement  has  led  your  customer  to  ex- 
pect more  than  he  finds,  the  chances  are  that  he  will  not 
buy  the  property,  and  you  will  have  lost  the  cost  of  the 
ad,  valuable  time,  and  what  more,  the  confidence  of  a 
possible  client. 

As  John  Ruskin  once  said,  "Do  not  let  us  lie  at  all. 
Do  not  think  of  one  falsity  as  harmless,  and  another  as 
slight,  and  another  as  unintended.  Cast  them  all  aside. 
They  may  be  light  and  accidental,  but  they  are  ugly  soot 
from  the  pit  for  all  that,  and  it  is  better  that  our  hearts 
should  be  swept  clean  of  them,  without  one  care  as  to 
which  is  largest  and  blackest." 

So  let  us  remember  always  to  be  truthful  in  our  ad- 
vertising as  well  as  honest  in  all  our  personal  contacts. 
That  is  the  only  way  to  win  the  confidence  of  the  pub- 
lic, and  once  having  gained  that,  advertising  can  easily 
be  made  one  of  the  chief  factors  of  success  in  the  real 
estate  field. 

What  should  a  good  real  estate  advertisement  do? 
It  should  sell  or  go  as  far  as  possible  towards  selling  the 
particular  property  advertised. 

So  let  us  now  consider  what  sort  of  advertisement  to 
write — just  what  is  best  to  say  and  how  best  to  say  it — 
in  order  to  arrest  attention,  create  interest  and  arouse 
desire  on  the  part  of  the  reader  to  buy,  or  at  least  make 
inquhy  concerning  the  property  advertised. 

Let's  start  with  the  listing  of  a  piece  of  property.  An 
owner  of  a  brick  cottage  in  Belmont  comes  to  your  office 
and  says,  "I  understand  you  have  sold  quite  a  number  of 
houses  in  my  neighborhood.  I  am  leaving  the  city  in  a 
few  weeks  and  want  to  list  my  home  for  sale." 

"Thank  you,  Mr.  Owner,  we  will  fill  out  this  listing 
card  and  I  will  personally  inspect  the  house  this  afternoon 
if  convenient  to  the  folks  at  home.  Then,  if  in  my 
judgment  the  property  can  readily  be  sold  at  your  price 
through  dihgent  effort,  I  shall  ask  the  exclusive  sale  for, 
say,  thirty  days." 

"But,"  the  owner  begins  to  protest,  "I  do  not  v/ant  to 
give  anyone  the  exclusive  sale.  I  am  anxious  to  sell 
quickly  and  intend  Hsting  the  property  with  four  or  five 
agents." 

Then  it  would  be  proper  for  you  to  say:  "For  that 
very  reason  I  would  suggest  that  you  list  the  property  ex- 


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34 


Modern  Real  Estate  Practice 


clusively.  It  is  much  better  to  have  one  agent  working 
industriously  and  loyally  in  your  interests  than  to  have 
half-a-dozen  who,  knowing  that  each  one  of  them  has 
but  one  chance  in  six  to  realize  on  his  advertising  and 
efforts,  will  work  only  half-heartedly  and  seek  only  to 
"get  an  offer"  and  then  try  to  beat  down  your  price.  Fur- 
thermore it  is  positive  injury  to  property  to  have  it  pro- 
miscuously advertised  and  offered  around.  It  soon  be- 
comes familiar  and  cheapened  in  the  eyes  of  prospective 
purchasers.  List  your  property  with  the  one  agent  who 
you  have  reason  to  beUeve  is  most  likely  to  get  results 
for  the  particular  class  of  property  you  wish  to  sell  or 
lease,  and  he  will  give  you  the  benefit  of  every  ounce  of 
loyalty,  knov/ledge,  and  ingenuity  he  may  possess." 

It  may  appear  that  I  have  strayed  somewhat  from 
my  subject  in  presenting  this  argument  for  exclusive  list- 
ings, but  it  is  intended  to  answer  the  question  of  "What 
to  advertise?"  If  every  Realtor  in  any  given  community 
would  adopt  the  policy  of  advertising  only  such  prop- 
erties as  were  given  him  exclusively  for  sale  and  will 
accept  an  exclusive  listing  on  only  such  properties,  after 
personal  inspection,  as  he  conscientiously  believes  he  can 
through  adveii;ising  and  diligent  effort  sell  at  the  price 
given,  it  would  redound  greatly  to  his  benefit  as  well  as 
that  of  the  owner.  More  sales  and  quicker  sales  can  be 
made  through  exclusive  listings  and  at  a  great  saving  of 
time  and  duplication  of  effort. 

Having  listed  the  property  exclusively  it  is  now  your 
duty  to  use  all  reasonable  diligence  to  make  a  satis- 
factory sale  as  soon  as  possible.  The  greatest  aid  in  find- 
ing a  purchaser  is  Advertising.  Have  a  commercial 
photographer  go  out  immediately  and  take  a  picture  of 
the  house  showing  front  and  side  view,  preferably  from 
two  angles.  Have  two  prints  made,  one  unmounted  from 
which  to  make  a  newspaper  cut,  the  other  to  be  placed  in 
your  office  to  show  to  prospective  purchasers.  If  the  pic- 
ture presents  an  attractive  and  clear  cut  view  of  the  house, 
place  it  at  the  top  of  a  display  ad  in  either  a  Sunday 
Morning  or  Week-day  afternoon  daily  newspaper.  Two 
column,  10  inches,  or  three  columns,  8  inches,  is  suffi- 
cient for  a  pleasing  display  and  not  too  expensive  for 
advertising  a  $12,000  brick  cottage. 

The  copy  would  read  about  like  this : 


'     • 


t 


Dallas    School   of   Commerce 


35 


Make  Your  Family  Comfortable  for  Fall  and  Winter 

In  this  Stoutly-Built,  Furnace-Heated,  Brick  Home. 

Location:  No.  1820  Belmont  Avenue,  within  one 
block  of  car-line  and  two  blocks  of  Greenville  Road.  A 
home  in  keeping  with  its  attractive  surroundings.  Lot 
50x200  feet.  House  contains  living  room,  16x22,  large 
dining  room,  kitchen  complete  to  the  last  detail,  3  cheer- 
ful bed-rooms,  cozy  breakfast  room,  tiled  bath,  ample 
closet  room.  Hot  air  furnace,  easily  operated,  plastered 
walls,  hardwood  floors,  pleasing  architecture. 

The  only  thing  lacking  is  garage  and  servant's  quar- 
ters, which  would  cost  to  build  from  $800  to  $1,200. 

Owner  leaving  the  city  permanently,  has  made  a  price 
of.  $12,000,  on  terms  of  $4,000  cash,  the  balance  in  con- 
venient payments  at  8%. 

Phone  for  appointment  (name,  address  and  phone 
number) . 


Exclusive  Agent. 

The  question  of  where  to  advertise  involves  territory 
and  mediums  to  be  used.  As  to  territory,  except  it  be  a 
big  ranch  or  colonization  proposition,  I  would  suggest  that 
real  estate  advertising  can  best  be  confined  to  local  ter- 
ritory, that  is,  if  the  property  is  located  in  Dallas  or 
within  a  fifty  mile  radius,  then  the  Dallas  or  Fort  Worth 
papers  would  be  best  to  use.  If  located  in  San  Francisco 
or  within  a  fifty  mile  radius,  then  the  San  Francisco  or 
Oakland  papers  would  be  best  to  use. 

Real  estate  lends  itself  readily  to  newspaper  advertis- 
ing. There  are  a  few  other  mediums  which  can  profit- 
ably be  used,  such  as  direct  mail  advertising  and  particu- 
larly "For  Sale"  and  "For  Lease"  signs  on  listed  prop- 
erties, but  newspaper  advertising  gets  the  attention  of 
the  greatest  number  of  people  at  a  minimum  of  cost  and 
in  the  quickest  space  of  time.  Display  advertising  in  the 
local  newspapers  can  frequently  be  used  to  advantage 
especially  on  higher  class  properties  listed  exclusively, 
but  the  most  direct  and  least  expensive  avenue  of  ap- 
proach is  through  the  classified  columns  under  the  proper 
heading.  A  reader  interested  in  the  purchase,  sale,  or 
lease  of  any  kind  of  property  is  likely  to  turn  first  to 
the  classified  columns  of  his  daily  newspaper  where  he 
knows  he  can  readily  find,  properly  classified,  a  list  of 


> 


Ill 


l«l> 


36 


Modern  Real  Estate  Practice 


properties  of  the  general  character  he  is  seeking.  If  he 
finds  your  name  among  the  rest  and  the  particular  prop- 
erty you  are  advertising  seems  to  strike  him  better  than 
some  other,  you  are  in  a  fair  way  to  make  a  sale.  If  you 
are  not  represented,  it  is  almost  as  if  a  customer  called 
at  your  office  and  found  the  door  closed  with  a  placard 
on  the  outside  saying  "Will  return  later."  You  may,  but 
he  will  not. 

Next  in  importance  to  newspaper  advertising  is  the 
proper  placing  of  signs,  preferably  a  neat  metal  or  board 
sign,  on  vacant  lots,  and  "For  Lease"  cards  on  vacant 
buildings.  Occasionally  an  attractively  painted  bill  board 
in  a  prominent  location  or  a  cloth  sign  on  a  building  not 
only  attracts  attention  to  the  particular  property  but  is 
good  for  general  advertising,  providing  it  does  not  mar  a 
beautiful  landscape  or  protrude  itself  obnoxiously  in  an 
otherwise  desirable  neighborhood.  Personal  or  circular 
letters  to  a  selected  list  frequently  can  be  used  to  advan- 
tage in  presenting  certain  properties. 

If  it  so  happens  some  day  that  you  are  given  the  ex- 
clusive handling  of  a  large  residence  addition,  or  indus- 
trial sub-division,  which  will  warrant  the  expenditure  of 
several  thousands  of  dollars  in  advertising,  my  advice  is 
to  do  as  I  would  do,  employ  the  services  of  a  capable, 
reputable,  local  advertising  agency  to  write  and  place 
your  advertising.  They  will  know  how  to  do  it  much  bet- 
ter than  you  or  I  to  get  the  best  results  for  the  money 
spent.  That  is  their  business.  Yours  and  mine  is  to 
sell  and  lease  real  estate,  not  to  advertise. 

Someone  has  said,  "A  people  without  vision  will  per- 
ish." Well,  a  Realtor  without  vision  may  not  die  right 
away,  but  he  cannot  survive  long.  He  must  believe  in 
his  city  and  his  state,  and  have  faith  in  their  future.  He 
must  believe  in  Real  Estate,  and  realize  how  great  a 
place  it  holds  in  the  great  scheme  of  things,  that  it  repre- 
sents more  than  half  the  wealth  of  the  world,  and  is  the 
one  thing  with  which  every  man  and  woman  is  con- 
cerned, either  in  the  capacity  of  landlord  or  tenant. 

Ask  Real  Estate  herself  who  and  what  she  is,  and 
she  will  answer: 

I  AM  REAL  ESTATE 

I  am  the  basis  of  all  wealth. 

I  am  the  foundation  on  which  have  been  reared  the 
civilizations  of  all  the  ages. 


I 


} 


-I 


{, 


Dallas   School  of   Commerce 


37 


I  am  the  pawn  for  which  kings  and  emperors  and 
legions  without  number  have  fought. 

Centuries  ago  boundary  lines  were  drawn  across  my 
surface,  and  I  was  portioned  out  among  tribes  and  na- 
tions ;  property  rights  were  established,  society  came  into 
being,  and  chaos  gave  way  to  law  and  order. 

I  am  the  farm,  the  mine,  and  the  forest. 

You  need  but  to  "tickle  me  with  a  hoe  and  I  laugh 
with  a  harvest." 

Plant  a  grain  of  wheat  or  corn,  a  seed  of  flax  or  cot- 
ton, on  my  broad  bosom,  and  I  reproduce  a  thousand-fold, 
furnishing  food  and  fabric  for  all  the  children  of  man. 

From  my  depths  and  mountain-sides  are  mined  all  the 
useful  and  precious  ores  and  metals. 

In  my  forests  are  hewn  the  timbers  which  pass 
through  lathe  and  plane  into  the  palace  of  the  prince,  the 
house  of  the  merchant,  the  humble  home  of  the  poor. 

I  am  the  Great  City,  where  hundreds  of  thousands 
crowd,  and  men  bid  vast  sums  for  the  privilege  of  calling 
a  few  square  feet  their  own. 

As  the  population  of  the  earth  continues  to  grow,  I 
shall  be  in  ever-increasing  demand  for  my  area  does  not 
expand. 

People  must  live  and  I  am  the  source  of  all  sustenance. 

I  bear  the  burdens  of  taxation,  for  the  expense  of  gov- 
ernment and  the  welfare  of  the  people. 

While  but  few  comparatively  among  men  claim  title 
of  possession,  I  am  Servant  of  all  Mankind. 

I  do  not  run  away.  I  cannot  be  carried  off.  Fire  nor 
the  elements  can  destroy  me.  I  stand  through  the  rav- 
ages of  Time. 

And  for  these  reasons  am  I  called  Real  Estate. 


--^*^'>^:*_- 


< 


Dallas   School   of   Commerce 


39 


REAL  ESTATE  SALESMANSHIP 


>lj! 


I*    J    ^ 


Mi 


By  Porter  Lindsley. 

The  Art  of  Selling  Real  Estate. 

Salesmanship  has  received  unlimited  attention  on  the 
part  of  a  great  many  business  houses  and  schools  of 
salesmanship,  and  books  on  selling  have  multiplied  great- 
ly in  the  last  few  years,  but  very  little  has  been  written 
for  real  estate  salesmen. 

The  art  of  salesmanship  begins  in  the  mind — ^Think 
success — ^think  confidence.  This  thought  in  your  brain 
will  show  in  your  face;  the  greatest  factor  in  selling  is 
personality,  and  personality  is  made  by  thoughts. 

Real  Estate  Salesmanship  covers  saleswork  in  a  much 
broader  sense  than  the  usual  term  implies. 

A  real  estate  salesman  not  only  has  to  sell  the  pur- 
chaser, but  has  to  sell  the  seller  on  the  idea  of  selling  at 
the  same  time  he  has  sold  the  buyer  on  the  idea  of  buy- 
ing. As  a  rule,  this  is  considerably  harder  to  do  than 
most  people  imagine. 

It  has  often  been  said  that  real  estate  salesmanship 
is  a  "knack"  rather  than  sales  ability.  While  some  men 
seem  to  be  "Born  to  the  Job,"  experience  is  necessary  to 
properly  educate  and  "round  out"  a  real  estate  salesman, 
as  there  are  many  legal  phases  to  the  business. 

After  knowledge  of  realty  values,  the  real  basis  of 
successful  salesmanship  is  securing  and  retaining  the  con- 
fidence of  the  public. 

A  Real  Estate  Salesman  must  have  the  necessary 
qualifications  and  ability  to  sell  real  estate  himself  with- 
out a  great  deal  of  help  or  assistance,  because  he  is  alone 
and  out  of  the  office  with  his  prospects  practically  all  of 
the  time.  The  office  or  firm  can  give  good  support,  but 
it  is  up  to  the  salesman  himself  to  actually  close  the  deal. 

The  biggest  job  of  the  real  estate  salesman  is  to  keep 
up  his  courage  and  enthusiasm ;  keeping  his  mind  stimu- 
lated to  get  the  best  daily  results. 

It  seems  to  be  the  idea  of  prominent  real  estate  men 
that  the  average  salesman  does  not  work  at  his  best  ca- 
pacity more  than  twenty-five  per  cent  of  his  time.    If  this 


j  111 


40 


Modern  Real  Estate  Practice 


be  true,  think  what  wonderful  results  could  be  had  by  a 
salesman  properly  applying  his  time. 

It  is  very  easy  for  a  real  estate  salesman  to  get  dis- 
couraged and  blue.  The  man  without  a  natural  happy 
disposition  should  not  engage  in  real  estate  salesmanship. 

Real  estate  salesmanship  should  appeal  to  ones  judg- 
ment, sentiment,  duty,  love  of  home,  and  should  arouse 
all  the  best  and  patriotic  instincts  in  a  man. 

Initiative  is  one  quality  a  real  estate  salesman  must 
have  to  make  a  success.  He  must  face  many  situations 
that  have  never  risen  before  and  must  solve  them  for  him- 
self. He  must  do  something  quickly,  or  some  other  sales- 
man will  sell  his  prospect. 

Another  quality  is  Tact,  the  ability  that  enables  a  man 
to  deal  with  other  men  of  different  temperaments  in  the 
right  way,  and  get  along  with  all  of  them — Tact  is  not  so 
much  what  a  man  says,  but  "how"  he  says  it. 

The  elements  of  real  estate  salesmanship  can  be  dis- 
cussed under  six  subjects: 

1st :    The  Man  or  the  Salesman. 
2nd:    Getting  Prospects. 

Securing  Confidence  and  Presenting  a  Proposi- 


3rd: 
tion. 

4th: 

5th: 
6th: 


Closing  Contracts. 

Listing  Property. 
Holding  Clientele. 


No.  1. 
The  Man  or  the  Salesman. 

The  successful  real  estate  salesman  must  be  a  student 
of  human  nature,  and  be  able  to  converse  in  a  correct  way 
with  men  and  women  of  all  classes.  He  should  be  a  stu- 
dent of  business  problems,  both  financial  and  commercial. 
He  should  know  his  City  from  "A"  to  "Z." 

The  successful  salesman  must  first  be  sold  on  himself, 
be  honest,  ambitious,  having  determination,  energy  and 
concentration. 

A  few  certain  rules  for  any  salesman  are:  Work  all 
the  time — Be  neatly  dressed  with  clean  collar  and  tie, 
clean  shoes,  finger  nails  and  teeth.  Did  you  ever  stop  to 
consider  how  you  would  appear  talking  to  a  prospect  with 
your  mouth  dirty  ?    Make  it  a  rule  never  to  smoke  while 


,  * 


Dallas   School   of   Commerce 


41 


talking  to  a  customer — ^Your  smoke  might  be  so  obnoxious 
to  him  that  he  cannot  keep  his  mind  on  what  you  are 
saying  to  him — "Sales  take  place  in  the  mind  of  the  buy- 
er." A  salesman  will  be  known  by  the  class  of  persons  he 
associates  with ;  therefore,  select  your  friends  with  care. 


A  salesman  should  never  discuss  himself  to  his  client, 
but  should  on  the  contrary,  direct  his  conversation  so  his 
prospect  will  be  led  to  talk  about  himself,  his  business, 
family  or  hobbies.    Then  be  a  good  listener. 

Be  dependable.  Always  keep  your  appointments 
promptly.  Be  early,  if  possible,  and  never  late.  If  pos- 
sible always  make  your  appointments  to  call  for  your  pros- 
pects instead  of  waiting  at  your  office  for  him  to  come 
to  you.  This  will  save  you  a  great  deal  of  time,  and  time 
is  a  large  portion  of  your  capital. 

A  very  successful  salesman  told  me  his  rule  was  as 
follows:  He  said  that  he  decided,  when  he  started  in 
business,  that  if  he  consistantly  put  in  his  TIME,  working 
on  intelligently  selected  prospects,  that  the  law  of  aver- 
ages would  insure  him  success.  And  it  did.  The  essence 
of  his  success  was  his  appreciation  of  the  value  of  his 
TIME.  It  was  his  capital,  and  its  intelligent  investment 
brought  him  success. 

No.  2. 
Getting  Prospects. 

In  my  opinion,  there  are  three  very  important  ways  of 
getting  prospects,  the  most  important  of  which  is  from 
personal  reference,  and  others  from  signs  on  properties 
and  newspapers  advertisements.  A  real  estate  salesman 
should  always  keep  uppermost  in  his  mind  the  proposi- 
tion of  having  the  confidence  of  the  public,  and  especially 
his  clients.  A  satisfied  customer  is  the  best  advertise- 
ment any  business  man  can  have,  and  every  time  a  real 
estate  salesman  makes  a  deal,  he  has  two  customers,  the 
buyer  and  the  seller,  both  of  whom  will  have  many  op- 
portunities of  sending  him  new  prospects,  if  their  deal- 
ings with  him  have  been  entirely  satisfactoiy  and 
pleasant. 

I  think  it  wise  to  spend  more  time  in  an  effort  to  find 
a  suitable  property  for  a  prospective  buyer,  rather  than 
trying  to  find  a  buyer  for  a  particular  property  you  have 
to  sell. 


( 


I 


I 


42 


Modern  Real  Estate  Practice 


t 


m 


No.  3. 
Securing  Confidence  and  Presenting  a  Proposition. 

In  offering  your  property,  be  careful  not  to  overstate 
its  advantages.  This  is  where  real  salesmanship  is  dem- 
onstrated, because  this  is  where  the  prospect  usually 
forms  in  his  mind  his  opinion  of  you  as  a  salesman,  and 
usually  comes  to  the  conclusion  as  to  whether  or  not  he 
expects  to  do  business  with  you.  If  you  are  honest  and 
careful  in  the  presentation  of  your  properties  you  gain 
the  confidence  right  here  of  the  buyer,  but  if  you  do  not 
know  your  properties  well  and  make  statements  that  af- 
terwards, upon  inspection  of  the  property,  prove  not  to  be 
altogether  correct,  the  prospect  will  be  on  the  defense  and 
will  not  work  with  you,  whereas,  if  you  have  his  full  con- 
fidence, he  will  work  with  you  and  be  easier  sold.  Noth- 
ing will  instill  confidence  in  the  purchaser  more  than  the 
knowledge  that  the  salesman  who  is  endeavoring  to  sell 
him  is  thoroughly  familiar  with  the  property  from  every 
angle. 

You  should  not  only  tell  the  truth  about  a  property, 
but  you  should  be  careful  to  state  the  facts  in  such  a  way 
that  an  untinith  cannot  be  inferred  therefrom.  Clearly 
cover  your  proposition,  but  never  argue  with  your  pros- 
pect; agree  with  him  or  dodge  the  issue. 

In  presenting  a  property,  you  should  first  sell  the 
prospect  on  the  community  or  the  section  of  the  city  in 
which  you  think  he  should  locate.  When  a  man  purchases 
a  home,  he  really  should  buy  community  first.  A  fine 
home  in  a  poor  community  is  a  bad  investment.  A  mod- 
est home  in  a  good  community  is  much  more  valuable 
than  a  fine  home  in  a  poor  community. 

Second :  After  your  prospect  has  decided  on  the  com- 
munity or  section  of  the  city  in  which  he  desires  to  locate, 
he  should  be  sold  on  the  street  in  that  community.  At  the 
present  time  when  a  large  amount  of  property  is  restrict- 
ed, and  in  all  probability  the  entire  city  of  Dallas  will 
soon  be  under  control  of  a  zoning  ordinance,  different 
streets  will  be  used  for  different  purposes,  and  different 
kinds  of  improvements,  so  it  is  a  very  important  matter 
that  a  buyer  should  decide  on  which  street  in  the  com- 
munity he  should  purchase,  as  the  restrictions  on  that 
street  will  control  the  way  in  which  the  property  can  be 
improved. 

Third:  After  deciding  on  which  street  he  desires  to 
locate,  there  comes  up  the  proposition  of  which  particular 


u 


■ 


^ 


(} 


A. 


Dallas   School  of  Commerce 


43 


block  on  the  street  is  best  suited  and  most  desirable  to 
meet  the  requirements  of  the  purchaser. 

After  deciding  on  the  street  and  block  in  the  com- 
munity, the  selection  of  the  house  itself  is  to  be  consid- 
ered. 

Do  not  show  the  property  to  the  man  or  woman,  and 
then  leave  it  up  to  the  one  shown  to  sell  the  other  party. 
Stay  with  the  one  you  have  shown  the  property  to  and 
sell  the  other  party  yourself.  Don't  ever  delegate  your 
sales  work  to  one  of  the  interested  buyers.  The  interest 
and  desire  to  buy  must  be  aroused  in  the  second  party  as 
well  as  the  first,  and  there  is  no  doubt  but  that  a  sales- 
man can  do  this  as  a  general  rule  better  than  one  of  the 
prospective  buyers. 

It  is  known  to  real  estate  men  that  the  unknown  ad- 
viser is  the  biggest  "bugaboo"  in  the  real  estate  business. 
This  unknown  adviser  might  be  a  banker,  friend,  archi- 
tect or  builder  who  wants  his  friend  to  build,  rather  than 
buy  a  place  already  built,  or  a  friend  not  interested  in 
real  estate  investments,  but  more  interested  in  invest- 
ments in  stocks  and  bonds.  The  National  Association  of 
Real  Estate  Men  are  considering  a  national  campaign  in 
papers  and  magazines  to  sell  real  estate  to  the  public,  in 
an  effort  to  combat  the  evil  of  an  unknown  adviser. 

Give  special  attention  to  the  member  of  the  family 
whose  decision  will  have  the  most  weight,  but  never  over- 
look the  member  of  the  family  who  must  foot  the  bill.  A 
salesman  should  center  his  efforts  on  the  property  most 
likely  to  please  the  buyer,  only  showing  such  other  places 
as  will  prove  his  reason  for  urging  the  purchase  of  the  one 
selected.  When  a  salesman  finds  that  he  cannot  sell  the 
place  selected,  it  is  then  time  to  select  another  place  in 
view  of  the  additional  information  now  in  hand.  It  is 
natural  to  follow  the  lines  of  least  resistance  and  try  to 
sell  the  place  that  appeals  best  to  the  prospect. 

Don't  think,  however,  of  switching  a  prospect  from  a 
property  to  which  only  minor  objections  are  made.  The 
cases  are  extremely  rare  in  which  a  prospect  is  exactly 
suited  in  a  property,  as  no  property  is  perfect. 

A  most  important  rule  forbids  trying  to  give  attention 
to  more  prospects  than  you  can  properly  attend  to.  Many 
salesmen  fail  to  succeed  by  trying  to  cover  too  much 
ground.  Don't  believe  for  a  second  that  you  can  sell 
everybody  that  you  hear  is  in  the  market.  Concentrate 
your  efforts  and  do  justice  to  a  selected  list  of  prospects. 


44 


Modern  Real  Estate  Practice 


Service  should  be  the  watchword  for  a  successful  career 
of  a  real  estate  salesman.  A  salesman  that  renders  true 
service  first  need  have  no  fear  about  monetary  results. 

No.  4. 

Closing  Contracts. 

Don't  talk  too  much ;  ^ve  the  prospect  time  to  make 
up  his  mind  so  when  you  try  to  close  with  him  he  will 
have  had  time  to  gather  his  thoughts  together  and  not 
put  you  off  by  saying — "Well,  V\l  have  to  think  it  over 
further."  The  climax  to  every  sale  is  when  the  pros- 
pective purchaser  signs  the  contract. 

By  the  time  it  comes  to  the  proposition  of  closing  a 
contract  on  the  property  selected,  it  will  be  much  easier 
to  get  your  prospect  to  put  up  a  deposit  and  sign  a  writ- 
ten contract  if  you  have  secured  his  confidence  and  the 
prospect  feels  that  you  are  properly  caring  for  his  inter- 
ests. A  large  deposit  is  very  often  helpful  in  the  final 
closing  of  a  deal.  It  is  unwise  to  discuss  commissions 
with  your  purchaser  unless  the  subject  is  brought  up  by 
him.  It  is  often  helpful  in  getting  a  prospect  to  sign  a 
contract  to  agree  to  submit  an  offer  for  less  than  the  ask- 
ing price  rather  than  standing  pat  too  long  on  your  first 
price.  In  this  way  you  can  get  the  prospect  to  agi^ee  to 
sign  a  contract  to  submit  to  the  seller  quicker  than  hold- 
ing out  for  a  stated  price,  then  if  the  offer  is  not  accept- 
able to  the  seller,  it  is  very  much  easier  to  get  the  pros- 
pect to  raise  his  offer  a  little,  as  he  has  already  made  up 
his  mind  by  this  time  to  buy  the  property.  As  a  rule  he 
feels  disappointed  if  he  fails  to  consummate  a  deal  after 
having  made  up  his  mind  to  purchase.  In  all  probability 
the  wife  has  already  planned  how  she  will  place  her  furni- 
ture in  the  house,  and  both  the  husband  and  wife  have  a 
mental  picture  of  just  what  they  will  do  with  it,  and  how 
they  will  occupy  same,  and  would  rather  pay  a  little  more 
than  be  disappointed  in  not  getting  the  property. 

A  contract  for  the  sale  of  a  home  should  always  be 
signed  by  both  the  husband  and  wife.  Under  our  Home- 
stead Laws  in  this  State,  a  wife  cannot  be  made  to  sign 
a  deed  to  the  home,  but  after  signing  the  contract,  she  is 
morally  bound  to  deliver,  and  in  most  cases  will  deliver, 
although  she  may  regret  having  sold. 

After  the  contract  has  been  properly  executed  by  both 
buyer  and  seller,  too  much  care  cannot  be  taken  in  the 
final  closing  of  the  deal.    The  agent  or  firm  making  the 


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Dallas   School  of  Commerce 


45 


deal  has  an  obligation  to  both  the  buyer  and  seller  to  see 
that  both  parties  are  properly  treated  and  the  deal  closed 
on  the  proper  basis  with  complete  statements  made  to 
both  the  seller  and  buyer.  It  is  always  a  good  rule  to 
keep  a  copy  of  all  statements  affecting  the  closing  of 
deals,  as  in  future  months  or  years,  either  the  buyer  or 
seller  might  call  on  you  for  information  as  to  the  detail 
of  how  a  particular  deal  was  closed. 

A  large  number  of  real  estate  offices  maintain  a  Con- 
veyancing Department  that  gives  its  entire  time  to  the 
final  closing  of  deals,  thus  leaving  a  salesman's  entire 
time  to  be  devoted  to  actual  selling.  An  efficient  and 
careful  conveyancing  department  can  do  a  firm  a  great 
deal  of  good,  or  a  careless  conveyancer  can  do  a  great  deal 
of  harm,  as  it  depends  upon  the  final  consummatioin  of 
the  details  of  closing  a  purchase  or  sale,  as  to  whether  or 
not  the  buyer  or  seller  goes  away  with  a  good  taste  in  his 
mouth,  and  the  proper  feeling  towards  the  firm. 

Real  Estate  brokerage  business  is  becoming  to  be 
realized  more  and  more  as  a  profession,  as  better  meth- 
ods of  getting  results  are  employed.  Leave  no  doubt  as 
to  the  commission  you  are  to  receive,  the  lack  of  which 
might  cause  a  misunderstanding  after  you,  as  a  sales- 
man, have  completed  your  part  of  the  transaction. 

No.  5. 

Listing  Property. 

Among  real  estate  men,  it  has  often  been  said — "Prop- 
erty well  listed  is  half  sold."  I  think  this  is  true.  I  am. 
in  favor  of  exclusive  listings  and  would  rather  have  ten 
good  exclusive  listings  to  advertise  and  work  on,  than  to 
have  100  listings  that  are  not  exclusive.  The  average  real 
estate  office  is  burdened  with  too  many  listings  that  are 
not  saleable.  It  is  not  necessary  to  try  and  get  a  property 
listed  at  what  you  consider  an  extra  cheap  price.  A  good 
listing  should  be  a  property  first  in  saleable  condition, 
and  second,  at  a  reasonable  price.  Don't  try  to  think  too 
much  for  the  buyer.  What  you  might  consider  a  bargain, 
your  customer  might  not  want  at  any  price.  I  believe 
most  salesmen  make  the  mistake  of  trying  to  think  too 
much  for  the  buyer.  There  are  millions  of  different  types 
of  homes  that  suited  some  one  or  they  would  not  have 
been  built. 


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Modern  Real  Estate  Practice 


No.  6. 

Holding  Clientele. 

Remember  that  the  owner  for  whom  you  are  selling  is 
your  client ;  insist  on  a  square  deal  for  the  buyer,  but  do 
not  lose  sight  of  j'^our  obligation  to  the  one  who  is  paying 
you  your  commission.  Some  people  wonder  how  a  sales- 
man can  advise  a  seller  to  sell  and  at  the  same  time  advise 
the  buyer  to  buy  a  particular  property.  As  a  rule  the 
seller  has  a  reason  for  selling  and  the  buyer  buys  what 
suits  his  needs,  so  there  are  always  plenty  of  arguments 
why  a  person  should  sell  that  wants  to  sell,  and  reasons 
why  the  buyer  should  buy,  provided  the  property  meets 
his  requirements,  and  a  salesman  should  not  try  to  sell  a 
customer  property  that  does  not  meet  his  requirements. 
There  are  enough  offerings  for  a  purchaser  to  always  se- 
lect several  properties,  one  of  which  will  meet  his  re- 
quirements. 

Treat  your  competitors  fairly,  and  they  will  treat  you 
m  a  like  manner.  If  they  should  not,  they  will  be  boost- 
ing you  to  their  own  disadvantage.  Never  knock  a  com- 
petitor. Remember  that  he  is  in  your  own  line  of  busi- 
ness, and  that  the  standing  of  the  real  estate  business 
is  what  the  real  estate  men  themselves  make  it.  Always 
work  for  a  legitimate  commission.  Don't  try  to  make 
more  than  a  fair  commission.  This  should  be  strict- 
ly adhered  to,  except  under  extraordinary  circumstances, 
and  then  more  than  the  regular  commission  should  not 
be  made  unless  with  a  thorough  understanding  with  the 
parties  involved. 

There  is  no  trouble  in  holding  your  clientele,  provided 
you  abide  by  the  "Golden  Rule"— Honest  and  Honorable 
dealing  will  hold  and  build  up  your  clientele.  A  good 
motto  for  a  real  estate  man  is  "Close  every  deal,  so,  under 
similar  circumstances,  your  customer  will  be  glad  to  deal 
with  you  again."  And,  a  good  slogan  for  a  salesman  is— 
"If  I  don't  sell  my  customer.  Til  blame  no  one,  but  will 
seek  to  improve  my  salesmanship.'' 

I  might  state  in  closing  that  a  real  estate  salesman 
IS  m  a  similar  situation  to  a  Doctor.  His  time  belongs  to 
the  other  fellow.  You  must  go  with  the  prospect  at  his 
convenience,  whether  it  be  Saturday  afternoon  or  the 
average  holiday.  Quite  a  few  people  in  business  can  only 
look  at  Real  Estate  investments  "after  hours,"  and  this 


Dallas   School  of  Commerce 


47 


is  a  time  when  a  large  number  of  real  estate  salesmen 
get  in  their  best  work.  Most  any  business  man  wiU  glad- 
ly discuss  real  estate  in  the  evenings  at  home  when  the 
mind  is  off  of  his  regular  business.  People  in  general  like 
to  discuss  real  estate  conditions  as  they  realize  it  is  con- 
sidered "The  basis  of  all  wealth,"  and  the  safest  place  in 
which  to  invest  money. 

It  is  the  opinion  of  realtors  attending  the  National 
Association  meetings,  that  Sunday  selHng  should  be  dis- 
couraged. 


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Dallas   School  of  Commerce 


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II 


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I      I 

-J     I 


REAL  ESTATE  LAW 


By  George  T.  Burgess. 

Material  things  regarded  as  the  objects  of  legal  rights 
belong  to  either  one  of  two  classes,  i.  e.  they  are  either 
(1)  land  or  things  annexed  to  the  land  as  to  be  considered 
a  part  thereof,  or  (2)  movables.  This  classification  of  the 
objects  of  rights,  based  as  it  is  on  an  essential  difference 
in  their  character  was  recognized  in  the  Roman  law  and 
all  systems  derived  therefrom.  But  in  English  law  it  at- 
tained a  peculiar  importance  by  reason  particularly  of  the 
extended  developments  of  the  doctrine  of  estates  in  com- 
mon with  land. 

Land  being  fixed  and  immovable  and  capable  of  being 
made  a  subject  of  uses  or  estates  at  different  times  has 
given  rise  to  the  great  body  of  law  known  as  the  law  of 
real  property  or  those  rules  of  actions  governing  the 
ownership,  use  and  disposition  of  the  soil.  And  having  a 
fixed  location,  it  is  subject  only  to  the  law  of  the  forum 
or  of  the  sovereignty  in  which  it  is  located.  Not  beipg 
subject  to  wear,  removal  or  destruction,  estate  rights 
and  ownership  therein  are  fixed  and  governed  by  the  law 
of  the  sovereignty  and  of  the  time  when  such  estate 
rights  and  ownership  begin,  and  thus  the  laws  affecting 
titles  to  real  property  are  at  all  times  in  effect  for  the 
estate  and  rights  of  the  owner  are  created  by  or  arise 
under  the  laws  in  force  at  the  time  of  the  creation  of  the 
estate  or  the  acquisition  of  ownership;  and  though  such 
laws  may  be  thereafter  repealed,  modified  or  changed 
yet  the  ownership  or  estate  must  be  determined  under 
th  law  as  it  existed  at  the  time  of  their  creation  or  ac- 
quisition. And  while,  generally  speaking,  the  real  prop- 
erty within  the  geographical  limits  of  a  particular  Sover- 
eign is  governed  by  and  subject  to  the  law  of  the  sover- 
eignty, yet  accurately  speaking  this  must  be  understood 
to  mean  the  law  of  the  sovereignty  at  the  time.  Thus  in 
a  great  paii;  of  the  State  of  Texas,  titles  emanate  from 
the  Crown  of  Spain  and  in  another  part  from  the  Republic 
of  Mexico ;  and  the  laws  of  Spain  and  of  Mexico  in  force 
at  the  time  of  the  acquisition  of  those  titles  are  as  ef- 
fective and  as  binding  in  Texas  today  as  any  Act  passed 
by  the  present  government. 

At  Common  Law  growing  out  of  the  Feudal  idea,  all 


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Modern  Real  Estate  Practice 


lands  were  held  as  of  right  by  the  King  or  Sovereign  and 
by  him  granted  in  consideration  of  a  service  to  the  State, 
or  favors  to  the  Crown,  and  upon  conditions  of  service. 
And  so  in  the  law  of  real  property  we  speak  of  the  source 
of  title  as  the  sovereignty  of  the  soil.  This  doctrine  of 
the  ^'Sovereignty  of  the  Soil"  has  been  carried  in  the 
American  jurisprudence  and  the  title  emanates  from  the 
State  of  Sovereignty  first  having  jurisdiction  in  the 
geographical  limits  in  which  the  land  is  situated.  If  a 
part  thereof  be  acquired  from  any  sovereignty,  then  the 
acts  of  the  former  sovereign  and  the  laws  passed  regu- 
lating the  estates  in  and  the  rights  to  land  must  be  re- 
spected and  observed. 

Land,  by  reason  of  its  fixity  and  immovability,  is  the 
subject  of  use  at  the  different  times  and  by  different 
parties,  and  for  different  and  various  purposes.  And  thus 
there  sprang  up  at  Common  Law  what  is  known  as  **Es- 
tates"  in  land  stretching  from  the  absolute  ownership  to 
the  possessor  at  will  or  sufferance.  The  absolute  owner- 
ship being  designated  as  the  "fee  simple."  Other  estates 
being  estates  for  life,  upon  condition,  lease-hold,  at  suf- 
ferance and  at  will. 

Estates  are  created  or  arise  either  by  contract  of  the 
parties  or  through  operations  of  law.  Man  in  the  natural 
state  held  no  estate  in  or  title  to  land  other  than  the  pos- 
session, one  being  entitled  as  a  natural  right  to  the  pos- 
session of  that  which  he  was  using  and  for  the  mainten- 
ance of  himself  and  family.  But  increase  in  population 
and  establishment  of  civil  society  governments  for 
well-being  and  peace  forced  society  to  recognize 
the  right  of  private  ownership  and  to  provide  for  the  dis- 
position of  the  lands  upon  the  death  of  the  owner  or  pos- 
sessor; and  hence  we  have  in  all  jurisdictions  statutes 
regulating  title  upon  descent  and  providing  how  and  in 
what  manner  the  land  shall  be  distributed  amongst  the 
heirs  of  the  owner. 

Marriage  brings  with  it  rights  and  duties,  and  so  In 
every  jurisdiction  we  have  laws  regulating  marriageable 
rights  in  land. 

At  Common  Law,  and  by  "Common  Law,"  we  mean  the 
Law  of  England,  there  were  Estates  in  Fee  Simple,  which 
meant  absolute  ownership;  Estates  in  Tail,  which  was  an 
estate  for  life  in  one  with  the  limitation  of  the  remain- 
ing estate  in  the  heirs  of  another  for  all  time;  estates  in 
tail  were  limited  either  to  the  male  heirs  of  such  a  one, 


<•  1  * 


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Dallas   School  of   Commerce 


51 


or  to  the  female,  or  to  the  line  of  heirs  resulting  from  the 
marriage  of  particular  persons. 

A  base  or  determinable  fee  was  a  fee  determinable 
upon  the  happening  of  some  event  or  contingency  in  the 
future. 

Life  Estates  were  the  rights  in  the  holder  of 
possession  to  lands  for  his  natural  life  or  for  the  natural 
life  of  the  person  mentioned.  Thus  lands  could  be  granted 
to  "A"  for  his  life  or  to  "A"  for  the  life  of  "B." 

Estates  for  years  was  the  right  to  possession  of 
estate  for  the  time  limited.  Lease-hold  Estates 
created  mere  tenances,  and  Estates  by  Sufferance  or  V»^ill, 
permitted  the  possessor  to  remain  in  possession  dur- 
ing the  sufferance  or  at  the  will  of  the  owner  of  the 
superior  right  or  title. 

At  Common  Law,  upon  man^iage  the  existence  of  the 
wife  was  merged  into  that  of  the  husband  and  they  were 
regarded  as  one.  Out  of  the  marriage  relation  at  Com- 
mon Law  there  arise  what  is  known  as  the  "dower  right" 
and  tenancy  by  courtesy  dower  was  the  interest  to  which 
the  wife  was  entitled  in  the  property  acquired  by  the  hus- 
band after  marriage.  Courtesy  was  the  right  in  the  hus- 
band to  possess  for  his  life  all  land  of  which  the  wife  is 
siezed  during  coventure  in  fee  simple  or  fee  tail,  pro- 
vided there  is  issue  of  the  marriage  bom  alive  capable  of 
inheritance. 

The  right  of  one  to  make  disposition  of  his  estate  upon 
death  has  been  recognized  by  all  nations  and  this  gives 
rise  to  the  laws  surrounding  Wills.  Until  recent  years, 
in  all  Common  Law  jurisdiction,  the  power  of  the  wife  to 
contract  or  convey  was  not  recognized,  and  it  was  neces- 
sary in  order  to  dispose  of  her  dower  rights  that  she  join 
in  every  conveyance  with  the  husband.  Dower  attached 
by  reason  of  the  marriage  to  every  piece  of  property  ac- 
quired by  the  husband  as  courtesy  attached  in  favor  of 
the  husband  by  reason  of  the  marriage  and  birth  of  is- 
sue to  the  property  acquired  by  the  wife.  In  Texas,  how- 
ever, we  have  none  of  the  Common  Law  tenures,  except 
that  of  fee  simple  and  estates  and  other  terms  which  are 
analogous  to  the  tenures  of  Common  Law. 

The  Estates  of  Common  Law  resulting  from  marriage 
are  unkno^^Ti  to  the  laws  of  Texas,  the  Repubhc  having 
at  an  early  date  adopted  from  the  laws  of  Spain  what  is 
generally  termed  "community"  system.    This  recognizes 


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Modern  Real  Estate  Practice 


1 


three  estates,— the  separate  estate  of  the  husband,  which 
consists  of  all  property  brought  into  the  marriage  by  him 
or  that  acquired  after  marriage  by  gift,  devise  or  descent; 
the  separate  estate  of  the  wife,  which  consists  of  all  prop- 
erty brought  by  her  into  the  marriage  or  that  acquired 
afterwards  by  gift,  devise  or  descent ;  and  the  community 
estate,  which  consists  of  all  property  earned  by  the  ef- 
forts of  labor  of  either  the  husband  or  wife  or  both  after 
marriage. 

There  has  been  some  change  made  by  legislative 
enactments  in  the  last  few  years  as  to  the  common  or 
separate  estate  of  the  spouse,  but  the  effect  of  that  is  im- 
material here.  Under  the  laws  of  Texas,  the  husband  had 
the  disposition  and  control  of  the  community  property 
and  it  is  not  necessary  that  the  wife  join  in  the  mortgage 
or  sale  thereof  except  where  the  property  is  the  home- 
stead of  the  family  and  then  she  must  join  to  pass  her 
homestead  right  whether  the  property  be  community  or 
her  separate  estate  or  the  separate  estate  of  the  husband. 
The  wife  has  no  authority  to  dispose  of  her  separate  es- 
tate without  the  joinder  of  the  husband. 

Upon  death  without  leaving  a  will,  title  to  community 
property  vests  wholly  in  the  surviving  spouse,  if  there  be 
no  children  or  descendants  of  either  whether  of  that  par- 
ticular or  some  other  marriage.  If  there  be  children  then 
the  title  of  the  deceased  vests  in  his  or  her  children  and 
their  descendants  whether  the  children  are  children  of 
that  particular  marriage  or  otherwise.  The  separate  es- 
tate vests  in  the  children  of  the  deceased  with  a  life  es- 
tate in  one-third  of  the  real  property  in  the  surviving 

spouse. 

If  there  be  no  children  or  descendants,  then  one-half 
passes  to  the  wife  and  the  other  one-half  to  the  collateral 
line  of  the  deceased.  If  there  be  no  heirs  of  the  deceased 
then  the  entire  estate  to  the  surviving  spouse. 

Any  one  of  sound  mind  and  over  the  age  of  twenty- 
one  years  is  competent  to  make  a  will  and  by  an  instru- 
ment of  writing  may  designate  how  and  to  whom  he  de- 
sires his  property  to  go  in  the  event  of  his  death.  If  the 
will  be  wholly  in  the  handwriting  of  the  maker,  it  need 
not  be  witnessed ;  if  it  be  not  wholly  in  the  handwriting 
of  the  maker,  then  it  must  be  signed  in  the  presence  of 
two  witnesses,  each  of  whom  must  be  over  the  age  of  four- 
teen years.  Any  provision  may  be  made  with  reference 
to  the  property  unless  it  controvenes  good  morals  or  pub- 


Dallas   School  of   Commerce 


53 


I 


*. .  «*•., 


lie  policy.  Perpetuities  which  means  an  attempt  or  de- 
sire to  keep  the  property  within  a  certain  line  of  descent, 
or  to  direct  its  course  of  ownership  forever  of  for  a  longer 
period  than  a  life  or  lives  in  being  and  twenty-one  years 
thereafter  are  void  under  the  statutory  provision.  Chil- 
dren born  after  the  making  of  the  will  are  let  into  the  es- 
tate as  though  no  will  had  been  made. 

The  ordinary  forms  of  conveyances  are, — ^the  Deed, 
the  Mortgage,  and  the  Release.  The  form  of  Deed  is  pre- 
scribed by  the  Statute,  but  it  is  not  essential  that  the 
statutory  form  be  followed.  Any  instrument,  which  in 
effect  conveys  the  property  is  sufficient  and  the  statute 
provides  that  a  fee  simple  shall  be  deemed  to  be  conveyed 
unless  a  different  estate  is  limited  or  created  by  the  in- 
strument. 

The  Mortgage  or  Deed  of  Trust  is  an  instrument  given 
to  secure  a  debt,  and  for  its  validity  must  be  founded 
upon  a  valid  and  subsisting  debt. 

In  Texas  any  property  may  be  mortgaged  except 
homesteads,  and  the  homestead  can  be  mortgaged  for  its 
improvement  or  for  the  purpose  of  raising  money  witii 
which  to  pay  taxes  due  thereon  or  for  the  purchase  money 
thereof.  If  it  be  mortgaged  for  improvement,  it  is  neces- 
sary that  the  improvements  first  be  contracted  for  by  a 
contract  of  writing  between  the  husband  and  wife  on 
the  one  side  and  the  one  furnishing  material  or  doing  the 
improving  on  the  other  side,  and  that  the  contract  be 
signed  and  acknowledged  by  both  the  husband  and  the 
wife  in  the  manner  required  in  the  conveyance  of  the 
homestead. 

A  vendor's  lien  is  the  lien  of  the  vendor  or  seller  re- 
tained upon  the  thing  sold  to  secure  the  payment  of  the 
purchase  money  agreed  to  be  paid.  As  appJied  to  real 
property,  the  lien  is  expressed  or  implied.  An  expressed 
lien  is  one  that  is  expressly  mentioned  or  provided  for  in 
either  the  Deed  conveying  the  property  or  the  notes  evi- 
dencing the  indebtedness.  An  implied  lien  is  one  that 
arises  between  the  parties  where  the  Deed  recites  an  all- 
cash  consideration,  but  where  in  fact  the  purchase  money 
was  not  paid  in  full.  As  to  the  expressed  hen,  all  pur- 
chasers under  the  vendees  have  notice  by  the  recitals  in 
the  Deed;  as  to  the  implied  lien,  the  purchasers  can  only 
be  charged  therewith  provided  they  had  actual  notice. 

Out  of  the  Vendor's  Lien,  there  has  arisen  in  Texas 


54 


Modern  Real  Estate  Practice 


the  doctrine  of  superior  title,  which,  plainly  stated,  is 
that  the  title  remains  in  the  vendor  until  the  purchase 
money  be  paid,  and  while  the  conveyance  from  the  ven- 
dor to  the  vendee  may  be  a  written  instrument  in  the  form 
and  having  the  force  and  effect  of  a  Deed  of  Conveyance, 
yet  it  is  but  a  contract  to  convey  and  upon  default  being- 
made  in  the  payment  of  the  purchase  money  the  vendor 
has  the  right  to  rescind  the  contract  and  by  the  superior 
title  vested  in  him  recover  the  property.  Or  he  may  con- 
vey to  a  third  party  and  the  title  acquired  by  the  third 
party  would  be  a  higher  and  superior  title  than  that  of 
the  vendee  who  had  defaulted  in  the  payment  of  the  pu^ 
chase  money.  The  vendor's  lien  and  the  superior  title 
exist  at  the  same  time  to  secure  the  same  debt,  and  yet 
are  not  the  same  thing.  The  lien  is  but  the  charge  which 
the  seller  has  upon  the  land  to  secure  the  indebtedness. 
While  under  the  doctrine  of  the  superior  title,  the  title  it- 
self is  recognized  as  being  in  the  vendor  until  the  pur- 
chase money  be  paid. 

The  Statutes  in  most  States  provide  for  the  recording 
in  some  public  office  of  the  instruments  affecting  titles 
to  land.  This  is  done  because  it  is  necessary  in  some 
way  to  preserve  evidence  of  the  title  to  land,  presumed 
to  exist  always. 

The  Statutes  in  Texas  provide  that  before  any  in- 
strument can  be  recorded  it  shall  be  acknowledged  before 
certain  officers.  The  effect  of  the  acknowledgment  is  not 
to  lend  validity  to  the  instrument,  except  in  the  case  of 
a  married  woman,  but  to  entitle  it  to  record.  In  the  case 
of  a  married  woman  the  acknowledgment  gives  validity 
to  the  conveyance  because  a  married  woman  conveys  both 
by  the  instrument  and  by  the  separate  examination  be- 
fore the  Notary. 

The  effect  of  recording  is  not  to  give  validity  to  the 
instrument,  but  is  merely  to  charge  subsequent  purchas- 
ers of  the  same  property  from  the  same  grantor  with 
knowledge  of  the  existence  of  the  instrument.  Possession 
has  the  same  effect  as  the  recording  has.  If  the  prop- 
erty be  in  the  possession  of  the  owner,  it  is  not  necessary 
that  the  instrument  by  which  he  holds  the  title  be  record- 
ed, for  his  possession  charges  every  one  with  notice  of  the 
title  by  which  he  holds. 


•i 


J 


Dallas   School  of  Commerce 


55 


CONVEYANCING 


By  W.  W.  Fisher. 

In  almost  any  business,  art,  or  profession,  there  are 
certain  fixed  principles  that  govern  certain  phases  of  the 
work,  while  in  other  directions  there  is  latitude  or  choice 
of  action.  In  the  medical  profession,  for  instance, 
anatomy  is  a  determinate  matter,  while  diagnosis  and 
method  of  treatment  are  matters  in  which  the  physician 
may  exercise  his  judgment  and  skill.  In  the  painter's 
art,  perspective  and  the  mixture  of  what  are  known  as 
the  primary  colors  to  attain  other  colors,  are  not  matters 
of  choice,  but  of  absolute  rule;  while  the  choosing  of 
shades  and  tones  and  the  skill  and  touch  of  the  artist  are 
the  matters  of  personal  differentiation  w^hich  result  in  a 
greater  or  less  degree  of  success  and  fame.  For  the  bank- 
er, the  discount  rate  and  the  interest  table  are  the  mat- 
ters inflexible;  while  the  moral  hazard  and  the  probability 
of  each  borrower's  success  are  the  phases  of  business  upon 
which  he  exercises  judgment  and  discretion.  Similarly, 
in  the  academic  world,  what  are  known  as  "the  exact 
sciences"  are  mathematics,  physics,  geometry,  botany, 
etc.,  studies  with  rule  and  without  latitude;  while  litera- 
ture, philosophy,  and  history  are  inexact  in  their  content 
and  have  no  rule.  In  real  estate,  conveyancing  is  perhaps 
the  only  phase  that  is  (or  should  be)  exact,  fixed,  accu- 
rate. Such  matters  as  appraisals,  security  of  loans,  man- 
agement, advertising,  systems,  construction,  salesman- 
ship, and  subdivisions  are  the  elastic  phases  wherein  judg- 
ment spells  success,  and  the  lack  of  it,  failure. 

Conveyancing,  then,  is  the  one  fixed  or  determinate 
part  of  the  business  of  real  estate,  and  has  to  do  with  the 
actual  preparation  of  papers  transferring  the  title  of  prop- 
erty. There  is  no  judgment  involved,  but  only  exact 
knowledge,  and  in  this  respect  the  subject  is  apt  to  prove 
less  interesting  than  some  others;  matters  of  rote  and 
formula  are  apt  to  be  tiring.  But  a  knowledge  of  con- 
veyancing is  essential  and  valuable  to  any  one  having  to 
do  with  real  estate,  even  though  he  may  never  be  called 
upon  to  draw  an  instrument.  In  this  paper  we  shall  not 
endeavor  to  cover  the  history  or  law  of  real  estate;  but 


56 


Modern  Real  Estate  Practice 


these  are  so  inseparable  from  conveyancing  that  inevit- 
ably we  must  refer  to  them. 

Look  for  a  moment  at  the  history  of  conveyancing.  In 
the  days  of  feudalism,  the  lord  installed  his  vassal,  or 
tenant,  upon  the  land  and  gave  him,  as  an  evidence  of  the 
right  of  tenure,  not  a  deed  or  a  lease,  or  any  instrument 
of  writing  (for  writing  was  in  those  days  a  rare  art,  prac- 
ticed by  a  few  savants  only) ;  but  in  the  presence  of  wit- 
nesses the  lord  took  a  clod  of  dirt,  or  a  piece  of  turf,  a 
bough  or  a  blossom,  and  gave  it  to  his  man  in  token  that 
he,  the  lord  of  the  manor,  bestowed  certain  rights  upon 
the  tenant,  while  in  return  the  lord  received  the  vassaFs 
oath  of  fealty  and  in  some  cases  the  promise  of  a  portion 
of  what  the  land  should  produce.  Look  also  at  the  early 
examples  of  what  we  have  come  to  call  "extension  agree- 
ment'* or  "renewal."  The  underling  each  year  brought 
to  his  lord  a  gift  in  token  of  acknowledgment  that  he  was 
the  lord's  faithful  vassal  and  follower;  and  the  suzerain, 
accepting  the  proffered  gift,  renewed  or  extended  the 
agreement  of  lease  or  tenure. 

As  the  holding  of  land  by  the  vassal  from  his  lord  be- 
came the  ordinary  thing,  there  gradually  came  to  be  more 
and  more  an  idea  of  permanency  to  the  tenure,  where- 
as it  had  originally  been  purely  at  the  pleasure  of  the 
lord  or  suzerain.     Later  on,  the  holder,  or  vassal,  came 
to  expect  to  hold  his  land  for  life.     Finally  the  custom 
evolved  that  the  lord  granted  certain  land  unto  a  certain 
named  vassal,  "and  unto  his  heirs."     When  the  words 
"and  unto  his  heirs"  were  added  to  the  grant,  the  tenure 
of  the  vassal  passed  beyond  the  limit  of  his  own  years 
and  the  land  descended  unto  the  heirs  of  his  body.    This 
was  the  beginning  of  really  permanent  tenure  by    the 
"freeholders,"  as  they  were  called,  from  the  crown.    The 
grant,  however,  might  not  be  from  the  king  to  the  actual 
occupant  and  user  of  the  land  direct;  but  in  some  cases 
the  grant  was  from  the  king  to  a  certain  powerful  duke, 
from  the  duke  to  a  baron,  from  the  baron  to  a  knight,  and 
from  the  knight  to  his  vassals,  the  freeholders.    In  each 
state  and  degree  of  the  tenure,  the  owner  receiving  the 
grant  was  vassal  unto  his  higher  lord  from  whom  he  held, 
and  he  was  also  suzerain  to  the  inferior  holder  to  whom 
he  in  turn  granted  the  land.    So  we  see  that  when  the 
tenure  by  the  vassal  from  the  lord  became  permanent 
through  the  grant  to  him  and  to  his  heirs,  and  when  this 
grant  was  given  in  writing,  w^e  had  our  first  cases  of  title 
transfer,  or  "conveyancing,"  as  we  now  know  it. 


'I 


<] 


.      ^ 


tfi. 


i 


Dallas   School  of  Commerce 


57 


A  later  development  of  transferring  titles  became  ef- 
fective when  the  system  was  adopted  of  filing  instru- 
ments of  transfers  with  an  official  appointed  to  have 
charge  of  same.  This  was  done  so  that  any  landholder 
could  go  to  such  official  to  establish  his  claim  before  the 
world  by  filing  the  grant  with  such  official,  and  also  in 
order  that  all  persons  might  know  and  have  the  means 
of  knowing  who  was  the  owner  or  claimant  of  certain 
land.  As  a  corollary  and  consequence  of  this  custom  of 
filing,  there  later  developed  what  came  to  be  known  as 
the  "doctrine  of  notice."  This  simply  means  that  if  a 
man  receiving  a  valid  grant  of  land  files  his  grant  with 
the  proper  officer,  he  shall  thereafter  be  deemed  and  con- 
sidered the  real  owner  of  such  land ;  no  other  person  can 
later  file  a  conveyance  of  the  same  land  in  his  own  favor 
and  legally  lay  claim  to  the  land  by  virtue  of  said  con- 
veyance, for  the  reason  that  prior  notice  has  been  given 
him  that  the  former  owner  of  the  land  has  already  con- 
veyed it  to  another.  This  doctrine  of  notice  is  one  of  the 
important  foundation  stones  upon  which  is  reared  the 
whole  structure  of  conveyancing. 

Coming  to  more  modern  times,  we  have  developed  a 
system  of  filing  with  a  certain  county  officer  all  papers, 
whether  grants,  leases,  mortgages,  or  what  not,  which 
bear  upon  the  title  to  land  within  that  certain  county. 
In  the  State  of  Texas,  such  instruments  are  filed  with  the 
County  Clerk,  who  thereupon  causes  the  instrument  to  be 
copied  upon  the  indexed  record  books  provided  for  that 
purpose.  This  serves  all  interested  persons  with  notice 
of  any  and  all  transactions  affecting  that  certain  parcel 
of  land  named  in  that  certain  instrument.  Hence  it  has 
come  to  be  that  the  act  which  accomplishes  the  transfer 
of  the  title  to  a  certain  property  is  the  act  of  filing  for 
record  the  instrument  of  transfer  with  the  County  Clerk, 
or  other  officer  appointed  in  other  states  to  effect  the 
recording  of  the  transfer.  If  any  instrument  is  not  so 
filed  and  recorded,  the  public  has  no  means  of  knowing 
the  transaction  and  is  not  charged  with  such  knowledge. 
Therefore,  if  the  owner  of  a  piece  of  land  should  grant 
the  same  unto  a  party  and  this  party  should  not  file  his 
deed  of  record,  and  if  subsequently  the  owner  should 
fraudulently  make  another  grant  of  the  same  property  to 
a  second  grantee,  who  thereupon  should  promptly  file 
such  grant  with  the  proper  officer,  the  second  party  would 
be  held  an  innocent  purchaser  and  the  rightful  owner  of 
the  land,  because  the  first  grantee  had  not  filed  his  deed 


i\ 


i 


58 


Modern  Real  Estate  Practice 


of  record  and  thereby  given  notice  that  the  original  ov^ner 
had  parted  with  his  title  to  the  property. 

Before  we  can  proceed  much  further  we  must  acquaint 
ourselves  with  some  of  the  instruments  used  in  convey- 
ancing, and  perhaps  we  can  better  understand  them  and 
can  better  connect  their  names  with  their  uses  if  v/e  trace 
the  history  of  a  piece  of  land  through  certain  activities. 

In  the  early  days  of  the  Republic  of  Texas,  then,  a 
certain  immigrant  from  Tennessee  made  his  way  to  the 
banks  of  the  Trinity  River,  and  having  there  "settled" 
upon  a  section  of  land  as  allowed  or  required  by  law,  or 
having  given  the  sum  required  by  the  State  for  the  land, 
he  obtained  a  government  grant  of  such  land,  or  "patent," 
as  it  was  called,  executed  by  the  President  of  the  Republic 
of  Texas  and  properly  sealed  and  attested.  By  filing  this 
patent  of  record  with  the  proper  officer  at  that  time  ap- 
pointed to  receive  it,  the  immigrant  became  the  titular, 
or  record,  owner  of  this  land.  His  patent  contained  a  de- 
scription of  the  land,  made  out  perhaps  crudely  and  inac- 
curately, because  necessarily  it  was  difficult  to  get  meas- 
urements, distances,  directions,  and  markers  exactly  cor- 
rect in  a  new  country  where  little  surveying  had  been 
done,  where  a  good  civil  engineer  was  a  very  rare  person, 
and  where  surveys  made  by  one  man  overlapped  or  failed 
to  meet  those  made  by  another.  Because  of  such  inac- 
curacies in  early  grants,  titles  in  many  locations  have  sub- 
sequently been  made  matters  of  doubt  and  questioning; 
but  this  was  and  is  inevitable  in  any  new  country,  and 
all  parts  of  all  countries  are  new  in  the  beginning. 

The  old  Tennesseean  held  his  grant  for  some  years 
and  then  he  sold  320  acres  of  it  to  another  man,  and  this 
man  sold  to  another,  and  so  on,  during  the  interval  of 
years  in  which  Texas  became  one  of  the  states  of  the 
United  States,  with  a  Governor  to  grant  patents  instead 
of  a  President,  and  in  which  cities  sprung  up  and  grew, 
among  them  the  City  of  Dallas.  A  half  dozen,  a  dozen, 
or  a  score  of  transfers  on  our  piece  of  property  may  have 
been  made  in  the  interval,  but  we  need  not  trace  each  of 
these  separately.  Each  owner  passed  title  in  reasonably 
good  fashion  to  his  successor  throughout  the  years;  and 
in  the  year  1910,  we  find  that  the  title  of  160  acres  of  the 
original  grant,  or  patented  land,  rests  in  John  Doe,  and 
the  city  limits  have  been  extended  to  include  this  prop- 
erty. At  this  point  Richard  Roe  purchases  80  acres  from 
John  Doe  for  the  purpose  of  opening  an  addition,  or  group 


Dallas   School  of  Commerce 


59 


4 


of  building  sites.  He  takes  from  John  Doe  a  General 
Warranty  Deed  to  the  property,  as  all  his  predecessors 
in  title  have  in  turn  taken.  A  deed  in  real  estate  is  a 
grant  of  a  title;  a  General  Warranty  Deed  is  a  grant  of 
the  title  with  a  warranty  by  the  grantor  to  defend  the 
title  against  adverse  claims.  Richard  Roe  having  received 
John  Doe's  General  Warranty  Deed,  files  it  of  record  and 
becomes  the  title  owner  of  the  160  acres.  He  may  run 
sewerage,  water,  and  gas  into  the  property  and  he  may 
improve  his  proposed  streets,  and  lay  cement  walks, 
etc.,  depending  upon  the  character  of  his  pro- 
posed addition.  He  is  now  ready  to  sell  off  his 
sites,  or  lots,  and  accordingly  he  files  a  dedicatory 
plat  of  the  addition  with  the  County  Clerk,  dedicating 
streets  and  alleys,  and  possibly  parks  or  plazas,  for  the 
perpetual  use  of  the  public.  If  inside  the  city  limits,  as 
in  our  case,  the  dedication  of  such  streets,  alleys,  and 
parks  must  be  accepted  by  the  municipality  before  these 
can  properly  be  called  public  ways. 

Charles  Brown,  a  single  man,  now  buys  Lot  No.  7  of 
Block  G,  of  Richard  Roe's  Eastland  Addition,  taking  a 
Warranty  Deed  from  Mr.  Roe,  the  title  holder,  and  filing 
it  for  record  to  show  himself  the  owner.  But  not  having 
at  hand  the  entire  $1500.00  purchase  price  of  the  lot,  he 
pays  $1000.00  cash  and  gives  what  in  other  states  would 
be  called  a  mortgage  note,  but  what  in  Texas  is  called  a 
Vendor's  Lien  note,  or  a  note  secured  by  Vendor's  Lien, 
for  the  remaining  $500.00.  This  note  remains  as  a  lien, 
or  claim,  against  this  lot  until  the  $500.00  is  paid.  Upon 
payment  of  the  note  to  Richard  Roe,  or  to  whoever  he 
may  have  sold  and  assigned  it,  Charles  Brown  rfeceives  a 
release  of  Vendor's  Lien,  the  filing  of  which  instrument 
releases  the  claim  against  the  lot  and  gives  him  a  clear 
fee  simple  title.  After  a  lapse  of  a  few  months  Charles 
Brown  decides  to  erect  a  small  cottage  on  his  lot,  and  he 
decides  to  borrow  money  necessary  for  the  improvement. 
He  arranges  with  the  Provident  Loan  Company  to  borrow 
$1250.00.  He  executes  a  Deed  of  Trust  and  a  Deed  of 
'Trust  note  against  the  property.  These  are  the  Texas 
equivalents  for  the  Mortgage  and  Mortgage  Notes  com- 
monly used  in  the  older  states.  The  effect  of  the  Deed  of 
Trust  is  to  declare  that,  if  Charles  Brown  shall  fail  to  pay 
off  and  discharge,  at  the  maturity  date,  a  certain  note  for 
$1250.00,  executed  to  the  order  of  the  Provident  Loan 
Co.,  the  Trustee  named  in  the  instrument,  to  whom  the 
title  is  conveyed  for  this  trust  purpose,  shall  sell  the 


60 


Modern  Real  Estate  Practice 


Dallas   School  of   Commerce 


61 


il 


It 


(I 


•iH 


property  at  public  sale  on  the  first  Tuesday  of  the  month 
following  default  of  payment  to  the  highest  bidder  for 
cash,  this  cash  to  be  used  to  pay  the  Provident  Loan  (Com- 
pany its  full  claim,  plus  interest,  penalty.  Trustee's  fees, 
etc.  A  Deed  of  Trust  differs  from  the  mortgage  form  in 
that  the  third  person,  the  Trustee,  acts  as  the  foreclosing 
agent  for  the  holder  of  the  note ;  whereas  under  the  terms 
of  a  mortgage,  the  real  estate  involved  becomes  the  prop- 
erty of  the  mortgage  holder,  or  mortgagee,  upon  his  fore- 
closing his  own  lien,  or  claim. 

After  living  for  a  time  in  his  small  house,  Charles 
Brown  is  married  and  decides  to  enlarge  and  improve  his 
house.  He  applies  to  the  Provident  Loan  Co.  to  lend  him 
additional  money,  but  he  is  advised  that,  though  they  are 
quite  willing  to  advance  him  additional  money  to  improve, 
they  cannot  now  make  him  a  further  "direct  loan,"  (i.  e., 
by  Deed  of  Trust).  Charles  Brown,  seeking  an  explana- 
tion, is  advised  that  when  he  married  and  became  the 
head  of  a  family,  he  gained  the  privilege  of  all  married 
people,  in  the  State  of  Texas,  of  claiming  a  homestead; 
and  this  property  being  actually  occupied  by  him  and  his 
wife  for  a  residence  is  therefore  their  homestead.  The 
laws  of  the  State  of  Texas  and  some  other  states  provide 
that  the  holder  of  a  debt  cannot  seize  the  property  desig- 
nated as  the  debtor's  homestead  to  satisfy  a  debt.  The 
homestead  law  of  Texas,  (made  years  ago  in  the  interest 
of  the  rapid  colonization  of  the  State),  immunized  from 
foreclosure,  or  execution,  200  acres  of  land  and  improve- 
ments thereon  in  the  country,  or,  in  a  village  or  city,  a  lot 
or  lots,  not  necessarily  adjoining,  used  for  home  purposes, 
having  a  value  not  to  exceed  $5000.00  at  the  time  said  lot 
or  lots  become  impressed  with  the  character  of  a  home- 
stead. 

Mr.  Brown  is  advised,  however,  by  the  Provident  Loan 
Co.  that  he  can  engage  a  contractor  to  make  the  desired 
improvements  on  his  homestead,  and  that  he  and  his  wife 
can  give  such  builder  a  Mechanic's  Lien  Contract  and  Me- 
chanic's Lien  short  time  note  for  the  full  amount  of  the 
improvements,  (say  $1000.00),  or  for  any  portion  thereof, 
as  agreed  with  said  builder;  and  that  the  mechanic  may 
then  sell  the  note  to  an  investor  in  interest-bearing  paper. 
This  is  accordingly  done  by  Charles  Brown,  and  he  and 
his  wife  deliver  their  Mechanic's  Lien  Contract  and  Note 
to  John  Jackson,  contractor,  in  the  sum  of  $500.00  pay- 
able in  thirty  days,  and  they  agree  to  pay  in  cash  the  re- 


'I 


*    I  '- 


"U^    ■% 


maining  $500.00  of  the  $1000.00  improvement.  The  Provi- 
dent Loan  Co.  now  buys  the  $500.00  note,  due  in  30  days, 
from  John  Jackson,  contractor,  who  conveys  it  by  a  Trans- 
fer of  Lien ;  and  Charles  Brown  and  wife  n'ow  execute  a 
Deed  of  Trust  and  Deed  of  Trust  note,  payable  on  the  date 
recited  in  the  note,  perhaps  the  same  maturity  date  as 
that  of  the  original  loan  of  $1250.00  on  the  original  small 
cottage.  In  this  Deed  of  Trust,  there  is  a  stipulation  that 
the  Deed  of  Trust  Note  and  the  instrument  securing  it 
subrogate  to  the  rights  of,  and  depend  for  their  power  of 
execution  existing  by  virtue  of,  the  Mechanic's  Lien  Con- 
tract. This  is  the  only  possible  way  to  borrow  money  on 
a  homestead  in  Texas, — by  a  Mechanic's  Lien,  or  Mater- 
ialman's Lien,  for  labor  or  material  or  both,  used  in  im- 
proving the  homestead. 

Some  time  later  Charles  Brown  sells  the  house  to  Wil- 
liam Johnson  for  $5000.00,  with  $2000.00  cash.  We  have 
seen  that  the  Provident  Loan  Co.  holds  the  original  first 
Hen  of  $1250.00  and  also  the  $500.00  second  lien  against 
the  property,  and  these  amounts,  totaling  $1750.00,  Wil- 
liam Johnson  assumes  and  agrees  to  pay  as  per  the  terms 
of  the  notes.  The  payment  of  $2000.00  cash  and  the  as- 
sumption of  $1750.00  in  outstanding  notes  leaves  $1250.00 
of  the  $5000.00  purchase  price  still  to  be  arranged;  and 
the  buyer,  or  vendee,  gives  the  seller,  or  vendor,  a  note 
for  this  $1250.00  due  and  payable  one  year  after  its  date, 
and  bearing  interest  at  the  current  rate.  This  is  a  Ven- 
dor's Lien,  but  it  must  be  remembered  that  it  is  not  the 
First  Lien  (or  Mortgage),  as  the  direct  loan  of  $1250.00 
and  the  Mechanic's  Lien  of  $500.00  given  against  the 
property  by  Charles  Brown  are  liens  superior  in  rank  to 
this  Vendor's  Lien  for  $1250.00.  This  $1250.00  note, 
therefore,  is  said  to  be  a  junior  lien,  inferior  to  those  al- 
ready existing  on  the  property.  If,  however,  these  latter 
mature  and  are  paid  off  and  released,  before  the  $1250.00 
note  matures,  the  latter  becomes  the  only  (and  therefore 
the  first)  lien  or  mortgage  against  the  property. 

Thus,  following  the  history  of  a  piece  of  property,  we 
get  light  on  the  meaning  and  effect  of  the  more  common 
instruments  of  conveyance,  which  with  certain  less  com- 
mon instruments,  of  which  we  have  not  observed  the 
working  effect,  we  may  now  briefly  define  and  distin- 
guish as  follows: 

(1)  A  Patent  is  a  federal  or  a  state  grant  of  land. 

(2)  A  General  Warranty  Deed  is  an  instrument  in 


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Dallas   School  of  Commerce 


63 


If 


which  the  seller  conveys  title  to  certain  land  to  a  buyer, 
and  guarantees  the  title  so  conveyed  without  condition 
or  limit. 

(3)  A  Special  Warranty  Deed  is  a  grant  of  title  by  a 
seller,  who  guarantees  the  vaUdity  of  the  title  in  his  own 
tenure  thereof. 

(4)  A  Deed  without  Warranty  conveys  title  but  does 
not  warrant. 

(5)  A  Deed  of  Dedication  is  one  in  which  the  grantor 
gives  and  dedicates  certain  land  to  a  certain  party,  usually 
the  general  public,  for  certain  uses,  such  as  streets,  al- 
leys, parks,  etc. 

(6)  A  Quit  Claim  Deed  is  given  to  release  a  "color  of 
title,"  or  supposed  claim  of  title,  which  the  grantor  does 
not  care  to  warrant.  It  is  usually  given  to  clear  a  title  to 
which  a  person  has  no  claim  in  equity  and,  therefore,  it 
usually  recites  no  (or  a  nominal)  consideration. 

(7)  A  Lien  is  a  claim.  A  Vendor's  Lien,  or  seller's 
Lien,  then,  is  a  claim  in  favor  of  the  seller  of  a  property, 
existing  because  the  purchase  price  has  hot  been  paid  in 
full.  A  Mechanic's  Lien  is  a  claim  against  property  ex- 
isting because  of  work  or  material,  or  both,  furnished  for 
the  improvement  of  property,  and,  to  the  extent  of  the 
lien,  not  paid  for. 

(8)  A  Deed  of  Trust,  or  Trust  Deed,  is  an  instrument 
conveying  property  title  to  a  Trustee,  who  is  charged 
with  seeing  that  certain  conditions  named  in  the  instru- 
ment are  fulfilled,  or  if  not,  that  the  land  is  sold  to  satisfy 
the  agreement  given  against  it.  In  case  of  such  a  sale  of 
the  property,  the  deed  made  by  the  Trustee  is  styled  a 
Trustee's  Deed. 

(9)  A  Mortgage  is  an  instrument  creating  a  lien  upon 
property  as  security  for  the  payment  of  money. 

(10)  A  Transfer  (conveyance,  or  assignment)  of  Lien 
conveys  a  claim  against  property  from  one  holder  thereof 
to  another. 

(11)  A  Release  of  Lien  is  executed  by  the  holder 
thereof  when  the  lien  has  been  satisfied. 

(12)  A  Sheriff's  Deed  is  one  executed  by  that  officer 
in  favor  of  a  person  to  whom  a  court  has  awarded  its  de- 
cree or  judgment  covering  the  property. 

(13)  A  Tax  Deed  is  given  by  the  County  Officer  who, 
acting  under  state  authority,  has  sold  certain  land  for 
taxes  past  due  thereon. 


*l 


No  paper  on  conveyancing,  however  brief,  would  be 
complete  without  some  reference  to  abstracting  of  titles. 
Let  us,  therefore,  summarize  the  meaning  and  purpose  of 
abstracting. 

An  abstract  of  title  is  an  authentic,  epitomized  history 
of  the  property  it  is  designed  to  cover.  Its  purpose  is  to 
show  the  story  of  the  title  to  any  person  interested  in  in- 
quiring into  it  for  any  purpose,  whether  as  a  prospective 
purchaser,  a  lender  of  money,  an  attorney  for  a  claimant, 
or  the  like.  Abstracts  of  title  on  properties  are  prepared 
by  men  or  companies  engaged  in  that  special  business; 
in  some  cases  and  localities  these  men  or  companies  are 
bonded,  that  is,  they  are  responsible  for  the  correctness 
of  the  advice  they  furnish.  Abstractors  or  title  men  have 
in  their  offices  copies  of  all  transfers  recorded  with  the 
County  Clerk,  or  Registrar  of  Deeds,  and  from  these 
copies  they  can  make  up  in  book  form  the  history  of  any 
title  in  their  county.  If,  therefore,  you  are  the  owner  of 
Lot  No.  3,  Block  K,  Washington  Heights  Addition,  with 
an  eight-room  house  situated  thereon,  and  you  should  de- 
sire to  borrow  $3000.00  on  the  property,  your  procedure 
would  take  a  channel  something  like  this :  You  apply  to 
the  Phoenix  Loan  Co.  for  the  loan,  and  probably  sign  an 
application  form,  giving  full  data  on  the  security  offered. 
The  company  sends  an  inspector  to  appraise  the  security, 
as  the  first  step;  and  if  that  phase  of  your  application  is 
passed  satisfactorily,  you  are  asked  to  present  your  ab- 
stract of  title  to  prove  that  you  own  the  property  free  of 
incumbrance  or  adverse  claim.  A  complete  abstract  of 
title  is  then  presented  to  the  Loan  Company  and  is  turned 
over  to  its  lawyer,  or  legal  department,  for  examination. 
Then  follow^s  an  exhaustive  search  for  possible  defects 
in  the  title;  and  as  there  probably  never  was  a  land  title, 
of  any  appreciable  age,  free  of  defects,  claims,  or  inac- 
curacies, the  attorney's  satisfaction  with  the  title  is  near- 
ly in  all  cases  a  matter  of  degree.  But  we  will  assume 
that  the  lawyer  is  satisfied  that  your  abstract  shows  that 
you  have  at  least  a  good,  if  not  a  perfect,  record  title,  and 
that  he  so  reports  to  his  company.  Then  the  record  title 
matter  being  disposed  of,  the  attorney  may  want  to  know 
that  no  other  person  is  in  possession  of  your  property,  or 
any  part  of  it,  and  claiming  it.  If  such  were  the  case,  even 
though  the  claim  were  false  and  without  basis,  the  loan 
to  you  would  not  be  forthcoming.  The  examining  attor- 
ney may  also  require  a  showing  as  to  any  one  of  many 
other  things, — your  marital  status  at  the  time  you  re- 


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Modern  Real  Estate  Practice 


ceived  the  title  and  at  the  present  time;  information  re- 
garding improvements  made  recently  enough  to  admit 
a  mechanic's  claim;  whether  you  have  ever  occupied,  or 
are  intending  to  occupy,  the  property  as  a  residence  or 
business  homestead;  whether  the  full  area  of  the  lot  as 
platted  is  actually  under  fence  and  in  possession ;  whether 
there  are  any  liens  for  street  improvements,  sewers,  ad 
valorem  taxes,  or  other  public  charge  or  assessment,  etc. 
These  matters  being  all  answered  satisfactorily,  perhaps 
by  written  affidavit  (or  sworn  statement)  delivered  to 
the  Loan  Company  to  be  filed  of  record  at  the  discretion 
of  its  attorney,  you  are  then  required  to  execute  your  note 
for  the  $3000.00  you  desire  to  borrow,  and  the  Mortgage, 
or  Deed  of  Trust,  securing  same.  While  these  final  steps 
are  being  taken,  either  the  abstractor  or  a  clerk  of  the 
company  may  be  finally  checking  the  county  records  as 
to  your  property  and  yourself,  to  ascertain  that  you  have 
not  fraudulently  mortgaged  or  sold  the  security  to  anoth- 
er party  since  the  abstract  was  made,  nor  that  any  judg- 
ment has  been  given  against  you  in  the  interim.  This 
final  check  having  failed  to  show  anything  unfavorable, 
you  receive  the  money  from  the  loan  company  and  deliver 
to  them  your  note  and  execute  the  Mortgage,  which  latter 
they  immediately  file  for  record  with  the  proper  officer, 
thereby  establishing  their  claim  against  your  property. 

Of  comparative  youth,  we  may  say,  at  least  in  some 
parts  of  the  country,  is  the  alternative  practice  of  title 
insurance,  which  takes  the  place  of  abstracts  of  title. 
Certain  firms,  companies,  or  corporations,  instead  of  mak- 
ing up  from  the  records  an  abstract,  or  book,  showing  the 
history  of  a  title,  upon  which  an  attorney  or  title  man 
may  then  give  his  opinion,  simply  examine  the  records 
themselves;  and  provided  they  find  the  title  reasonably 
good,  as  shown  by  the  records,  they  issue  a  certificate  of 
title,  or  in  the  case  of  some  of  these  companies,  a  policy 
of  title  insurance.  Some  of  these  companies  operate  un- 
der charters  granted  by  the  state  and  are  under  state 
supervision  and  are  required  to  deposit  securities  as  re- 
serves for  the  protection  of  policy  holders;  while  others 
of  them  operate  as  private  companies  without  state  super- 
vision. 

In  some  other  countries  and  in  some  states  of  our  own 
country,  title  matters  are  handled  under  the  Torrens  Sys- 
tem of  land  titles.  This  system  is  an  acknowledgment 
and  acceptance  by  the  state  of  the  correctness  and  valid- 
ity of  land  titles.    This  is  accomplished  in  the  case  of 


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Dallas   School  of   Commerce 


65 


each  separate  title  by  the  bringing  of  suit  in  the  state 
courts  to  try  the  title;  and  the  officers  appointed  by  the 
state  to  examine  into  the  matter  and  conduct  the  trial  of 
the  title,  either  accept  the  title  or  reject  it.  In  case  of 
rejection,  steps  may  be  taken  to  perfect  the  title,  or  to 
render  it  satisfactory  to  the  authorities.  When  a  title 
has  been  once  accepted  by  the  Torrens  system  officers, 
and  has  been  registered  in  the  state  indexes  as  a  good 
title,  there  is  no  further  conveyancing  trouble  thereafter 
on  this  title.  Examination  is  unnecessary  as  the  state 
simply  certifies  to  the  buyer  or  mortgagor  of  the  property 
that  the  title  is  good.  This  system,  however,  cannot  be 
said  to  have  attained  to  common  usage  in  states  where  it 
has  been  introduced.  In  Illinois,  for  instance,  statistics 
show  that  in  Cook  County,  during  the  first  eight  months 
of  the  year  1913,  20,000  properties  were  transferred  un- 
der the  method  of  abstracts,  approximately  the  same 
number  by  title  insurance,  and  only  600  transfers  were 
made  under  the  Torrens  system,  as  used  in  Illinois. 

We  are  probably  justified  in  this  brief  paper  in  ex- 
plaining the  principal  parts  of  the  most  important  of  all 
conveyancing  instruments,  the  Deed,  or  Warranty  Deed, 
as  we  in  Texas  usually  call  it.  It  is  the  most  important 
of  all  instruments,  as  it  is  by  the  Deed  that  the  title  ac- 
tually passes.  For  this  reason  conveyancers  should  be 
especially  exact  and  accurate  in  drawing  Deeds.  A  Deed 
may  contain  ten  principal  parts,  although  some  of  these 
are  obsolete  in  certain  localities;  and  an  ordinary  deed 
contains  only  five  or  six  of  these  principal  parts : 

(1)  The  premises  of  the  deed  include  the  names  of 
the  parties,  the  consideration,  a  recital  of  the  facts,  and 
a  description  of  the  property. 

(2)  The  habendum  is  that  part  which  states  what  es- 
tate is  given  the  grantee  in  the  property  granted,  whether 
a  life  interest,  fee  simple  title,  or  what  not;  if  other  than 
fee  simple,  it  is  also  stated  in  the  habendum  for  what  term 
this  estate  shall  endure  and  to  what  use  the  property 
shall  be  put  (if  the  use  be  limited). 

(3)  The  tenendum  was  formerly  used  to  express  the 
tenure  by  which  the  estate  granted  was  held;  but  this  is 
not  common  in  deeds  now. 

(4)  In  the  part  called  the  reddendum,  the  grantor  re- 
serves unto  himself  some  right  or  privilege  in  the  land 
conveyed,  such  as  a  mineral,  oil,  or  water  right. 

(5)  Next,  any  special  conditions  imposed  in  the  trans- 
fer are  recited,  as  the  payment  of  notes,  or  the  like. 


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Modern  Real  Estate  Practice 


i 


(6)  The  warranty  of  the  granting  parties  follows 
next,  in  which  the  grantors  and  their  heirs  are  held  bound 
to  warrant  the  title. 

(7)  The  clause  on  covenants  affords  opportunity  for 
the  expression  of  one  party  to  do  something  that  will  be 
beneficial  to  the  other  party  (such  as  the  grantee  agree- 
ing to  build  a  desirable  improvement  which  will  benefit 
the  grantor's  remaining  land  adjoining),  or  not  to  do 
something  which  might  injure  the  other  party  (such  as 
the  grantor  agreeing  that  he  will  not  use  his  remaining 
adjoining  property  for  a  boiler  foundry,  or  soap  factory, 
to  the  damage  of  the  grantee). 

(8)  The  conclusion,  or  testimonium  clause,  is  that 
which  recites  the  witnessing  of  the  signatures,  etc. 

(9)  Following  this  comes  one  of  the  most  important, 
and  one  of  the  most  commonly  neglected,  parts  of  the  en- 
tire deed, — the  acknowledgment,  or  proof  of  the  deed. 
This  is  the  certificate  of  a  notary  public,  or  other  eligible 
officer  designated  by  the  law  of  the  state  in  which  it  is 
made,  to  the  effect  that  the  grantors  have  aknowledged 
to  him  that  they  executed  the  instrument  in  the  form  re- 
quired by  the  state  law.  This  must  be  done  in  the  form 
as  required  by  the  statute  of  the  state  in  which  the  land 
conveyed  is  situated.  But  by  omission  of  some  vital  part 
of  the  form,  the  failure  to  insert  the  necessary  words,  or 
to  include  the  acknowledgment  of  the  grantor's  wife,  when 
necessary,  the  omission  of  the  notary's  signature,  seal, 
or  title,  acknowledgments  are  frequently  made  so  insuffi- 
cient as  to  open  the  way  for  future  criticism  of  the  title. 

(10)  The  certificate  is  the  last  portion  on  a  deed;  this 
is  a  certification  required  in  some  states  to  be  made  by  a 
certain  state  officer  to  the  effect  that  the  officer  taking 
the  acknov/ledgment  is  properly  qualified  to  take  such  ac- 
knowledgment. In  some  cases  the  officer  must  identify 
the  signature  of  the  acknowledging  officer. 

The  most  necessary  advice  and  caution  to  a  man  who 
is  to  have  conveyancing  as  his  work  is,  be  careful  and  ac- 
curate. You  are  doing  w^ork  the  correctness  of  which  will 
be  examined  and  checked  over  in  future  years  by  many 
persons,  and  some  of  these  will  be  harsh  critics.  Know- 
ing this,  frame  your  work  to  meet  such  criticism.  Re- 
member also  that  you  are  acting  in  the  capacity  of  a  trus- 
tee ;  you  are  entrusted  with  the  property  of  other  persons, 
\vho  take  it  for  granted  that  you  are  able  and  accurate 
in  the  perfonnance  of  your  work.  Therefore,  do  not  fail, 
but  prove  yourself  a  dependable  trustee. 


Dallas   School  of   Commerce 


67 


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MORTGAGE  LOANS 


By  E.  E.  Shelton 

The  investment  of  funds  by  the  American  public  has 
become  a  science,  and  as  a  result  of  the  most  careful  in- 
vestigation that  has  ever  been  given  this  branch  of  Amer- 
ican industry,  more  individuals,  banks,  trust  companies 
and  life  insurance  companies  are  investing  in  first  mort- 
gages, both  in  the  aggregate  and  in  comparison  with  all 
other  securities,  than  ever  before. 

In  the  investment  of  funds  in  first  mortgages,  both 
by  individuals  and  by  corporations,  the  basic  thought  is 
safety.  Safety  and  assured  income  are  the  factors  which 
distinguish  an  investment  from  a  speculation  and  where 
these  co-exist  in  perfect  proportion  they  establish  firet 
mortgages  as  a  standard  security. 

Farm  Mortgages. 

One  form  of  mortgage  which  has  long  been  rec- 
ognized as  a  standard  investment  is  the  American  fami 
mortgage.  The  farm  mortgage  differs  from  any  other 
safe  type  of  investment.  The  foundation  upon  which  it 
rests  is  the  inherent  productiveness  of  the  soil.  The 
faiTii  mortgage  carefully  made  and  properly  executed 
represents  one  of  the  highest  types  of  investment  se- 
curity. 

Neither  w^ars,  manipulations,  or  changing  local  condi- 
tions or  any  other  hurtful  agency  can  take  away  the  value 
of  the  security  behind  a  farm  mortgage — the  land.  The 
farm  has  always  given  the  world  its  food,  and  the  supply 
must  always  come  from  the  farm.  Hence,  farm  lands 
possess  a  basic  w^orth  equal  to,  if  not  greater  than,  all 
other  kinds  of  securities. 

The  safety  of  the  farm  mortgage  is  due  to  and  di- 
rectly derived  from  the  fundamental  law  of  life — we  must 
eat  to  live.  In  addition  to  the  attractiveness  of  farm 
mortgages  to  the  investor,  the  usefulness  of  funds  so  in- 
vested is  reflected  in  the  utilization  and  development  of 
our  National  wealth. 

City  Mortgages. 

Mortgages  on  improved  real  estate  in  large  cities  are 
becoming  more  and  more  a  favorite  form  of  investment, 


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Modern  Real  Estate  Practice 


due  to  the  rapid  growth  of  metropolitan  land  values,  as 
well  as  the  high  yield  of  property.  Heretofore  the  lack 
of  adequate  funds  for  the  development  of  our  towns  and 
cities  has  resulted  as  a  rule  in  a  higher  yield  from  this 
form  of  security  than  from  other  property  possessing 
like  safety.  Among  other  factors  which  have  contributed 
to  the  substantial  return  from  this  form  of  security  is  this, 
that  new  commercial  and  industrial  centers  have  been 
rapidly  developing  in  the  United  States  during  the  last 
few  years,  and  little  available  capital  exists  in  new  lo- 
calities for  investment  purposes,  as  practically  all  sur- 
plus funds  are  invested  in  personal  enterprises. 

Conservative  investors  in  the  Eastern  States  who 
were  receiving  large  returns  in  railroad  securities,  with 
few  exceptions,  were  unwilling  to  risk  their  money  in  un- 
known and  untried  localities.  As  a  result,  Vv^hen  funds 
were  needed  for  investments  in  mortgages  it  was  neces- 
sary to  obtain  them  from  the  immediate  locality  where 
knowledge  of  the  securities  was  easily  obtained.  The 
difficulty  of  securing  the  exact  sum  needed,  the  hesitancy 
to  make  long  time  inconvertible  loans  and  the  difficulty 
experienced  by  the  borrowers  in  securing  new  loans  with 
which  to  repay  their  obligations  resulted  in  a  high  rate 
of  interest,  and  in  many  instances,  large  commissions. 

Origin  of  Mortgages. 

Mortgages  owe  their  origin  more  to  the  necessities  of 
men  in  civilized  life  than  to  the  creative  genius  of  any 
particular  individual,  age  or  nation.  They  were  in  no 
sense  a  subject  of  invention  but  followed  as  a  necessity 
in  the  wake  of  civilization.  The  necessity  of  credit,  and 
the  consequent  sudden  demand  for  money  in  a  moment 
of  business  or  commercial  embarrassment  suggested  as  a 
natural  recourse  the  idea  of  the  mortgage  as  the  quick- 
est method  of  obtaining  the  necessary  funds.  It  also  af- 
forded to  the  lender  a  perfect  security,  easy  of  transfer, 
which  within  itself  renders  to  the  lender  the  same  service 
that  it  did  to  the  original  mortgagor. 

Mortgages  Defined. 

"A  mortgage  is  the  conveyance  of  an  estate  by  way 
of  pledge  for  the  security  of  a  debt  and  to  become  void 
on  payment  of  it." 

No  particular  form  is  necessary  to  constitute  a  mort- 
gage. It  must,  however,  be  in  writing  and  must  clearly 
indicate  the  creation  of  a  lien,  and  must  specify  the  debt 


% 


Dallas   School  of   Commerce 


69 


to  secure  which,  it  is  given,  and  the  property  upon  which 
it  is  to  take  effect. 

The  term  mortgage  has  a  technical  signification  at 
law,  and  is  descriptive  of  an  instrument  having  all  the 
requisites  necessary  to  establish  it  in  a  court  of  law. 

Trust  Deed. 

A  deed  of  trust  to  secure  a  debt  is  in  legal  effect  a 
mortgage.  It  is  a  conveyance  made  to  a  person  other 
than  the  creditor,  conditioned  to  be  void  if  the  debt  be 
paid  at  a  certain  time,  but  if  not  paid  then,  the  grantee 
may  sell  the  land  and  apply  the  proceeds  to  the  extin- 
guishment of  the  debt,  paying  over  the  surplus  to  the 
grantor.  It  is  in  legal  effect  a  mortgage  with  a  power 
of  sale. 

The  most  important  difference  between  a  mortgage 
and  a  deed  of  trust  is  that  in  the  case  of  the  mortgage 
the  conveyance  is  made  directly  to  the  creditor,  while 
in  the  deed  of  trust  it  is  to  a  third  person  for  the  mort- 
gagee's benefit.  Another  particular  difference  is  that 
a  deed  of  trust  with  power  of  sale  may  be  foreclosed  ac- 
cording to  its  terms  by  the  trustee  without  authority 
of  court,  whereas  a  simple  mortgage  can  be  foreclosea 
only  under  decree  of  court.  It  is  generally  provided  by 
the  terms  of  the  mortgage  that  the  mortgagee  shall  have 
the  right  to  sell  when  the  owner  defaults  in  the  payment 
of  principal  or  interest,  or  in  the  payment  of  taxes  as- 
sessed on  the  premises. 

Mortgages  Stable  In  Character. 

A  mortgage  is  not  affected  by  state  legislation,  or 
public  service  commissions,  or  by  anything  except  general 
conditions  that  exist.  It  is  in  the  opinion  of  many  fi- 
nanciers the  very  best  security  for  the  investment  of  mon- 
ey, if  it  is  made  by  men  who  know  the  business. 

Fundamental  Requirements. 

Money  is  a  commodity  which  seeks  the  highest  return 
consistent  with  safety.  One  of  the  first  requirements 
in  mortgage  loaning  is  freedom  from  burdensome  taxa- 
tion, the  assurance  of  a  satisfactory  return  on  capital 
invested,  and  a  strong  probability  of  being  able  to  collect 
the  principal  of  the  loan  when  necessary,  without  legal 
technicalities  or  serious  delays. 

In  most  states  there  is  a  statutory  provision  fixing 


i  ♦ 


i    I 

1 


70 


Modern  Real  Estate  Practice 


the  largest  legal  rate  of  interest  obtainable,  but  also  pro- 
viding that  a  higher  rate  may  be  secured  by  means  of  a 
written  agreement. 

In  many  states  burdensome  foreclosure  requirements, 
stringent  homestead  and  exemption  laws,  and  long  re- 
demption periods,  make  it  difficult  for  borrowers  to  se- 
cure funds  necessary  for  the  erection  of  homes,  or  for 
other  building  purposes. 

Homestead  Exemption. 

Property  to  varying  extents  is  exempt  from  levy  or 
attachment  up  to  certain  amounts.  In  all  states,  with  the 
exception  of  Texas,  the  homestead  exemption  can  be 
waived  by  both  the  husband  and  wife  joining  in  the  note. 
In  Texas,  however,  there  are  provisions  in  the  law  where- 
by loans  may  be  safey  made  on  homesteads  for  the  pui> 
pose  of  purchase  or  improvement,  and  with  careful  legal 
advice  this  situation  affords  no  undue  risk.  For  example, 
the  homestead  exemptions  range  as  follows:  in  Alabama 
$2,000,  Georgia  $1,600,  New  York  $1,000,  Tennessee 
$1,000,  Texas  200  acres  of  land  in  the  country  with  im- 
provements thereon,  and  in  the  City  a  lot  or  lots  of  value 
up  to  $5,000,  besides  improvements  thereon. 

Redemption  Period. 

By  redemption  is  meant  the  length  of  time  given  to 
the  mortgagor  for  redeeming  a  homestead  after  foreclo- 
sure has  been  made.  For  instance,  in  Alabama  the  re- 
demption period  is  two  years,  in  Arkansas  one  year,  in 
New  York  none,  Ohio  thirty  days,  Texas  none. 

Requirements  for  Safety. 

Large  mortgage  concerns  loaning  money  throughout 
the  various  states  consider  geographical  localities  and  na- 
tural resources  as  a  prime  requisite  in  making  loans. 

The  history  of  the  past  indicates  that  the  cities  which 
have  developed  as  the  result  of  natural  advantages,  and 
which  are  not  dependent  upon  some  particular  industry 
for  their  growth,  are  considered  far  more  stable  during 
periods  of  depression  than  cities  of  artificial  creation  or 
those  dependent  upon  a  single  industry. 

Cities  are  judged  in  a  measure  also  by  their  growth. 
A  moderate  rate  of  growth  over  a  period  of  years  is 
very  much  more  desirable  for  mortgage  loans  than  cities 


% 


Dallas   School  of   Commerce 


71 


which  have  had  an  extremely  rapid  or  far  below  normal 
growth. 

For  the  foregoing  reasons  the  large  mortgage  com- 
panies do  not  look  with  favor  upon  a  city  as  an  investment 
field  until  it  has  reached  a  normal  population  of  at  least 
30,000,  by  which  time  a  reasonably  accurate  forecast  of 
stability  and  future  growth  may  be  determined. 

Another  extremely  important  factor  to  observe  is,  that 
the  sections  of  a  city  which  are  retrograding  in  value, 
or  owing  to  topographical  defects  are  undesirable,  should 
be  avoided.  The  causes  bringing  about  the  decay  of  cer- 
tain parts  of  a  city  are  so  complex  as  to  make  it  difficult 
to  gauge  the  rate  of  recession  in  value. 

Vacant  lots  and  property  devoted  to  special  uses  are 
undesirable  because,  in  the  event  of  acquisition  under 
foreclosure,  unimproved  land  is  simply  a  source  of  ex- 
pense with  no  market  in  dull  times ;  and  in  case  of  prop- 
erty devoted  to  special  uses,  there  is  an  uncertain  in- 
come, a  limited  market  and  a  consequent  probability  for 
considerable  sacrifice  in  price  if  it  becomes  necessary  to 
dispose  of  same. 

Loans  therefore,  with  few  exceptions,  should  be  con- 
fined in  cities  of  moderate  size  to  those  classes  of  prop- 
erty in  most  general  demand,  such  as  retail  business 
property,  office  buildings,  residence  property  in  improv- 
ing localities  which  are  well  defined  and  free  from  ob- 
jections. A  careful  analysis  of  the  constant  shifting  tak- 
ing place  in  all  growing  cities  is  imperative  for  safety; 
and  this  information  can  be  more  accurately  obtained 
by  a  systematic  recording  of  real  estate  and  mortgage 
transactions,  including  leases,  sales,  and  building  per- 
mits. 

Appraisement. 

In  the  analysis  of  real  estate  an  attempt  to  lay  down 
rules  for  the  appraising  of  real  estate  values  is  probably 
the  most  difficult  of  the  whole  analysis  of  real  estate 
mortgages.  The  frequency  with  which  variations  from 
the  general  rule  occur  because  of  local  conditions,  is  so 
puzzling  that  hardly  any  fixed  rule  exists. 

There  are  some  exceptions  to  the  rule,  but  in  most 
all  cities  there  is  usually  a  general  income  basis  upon 
which  all  improved  property,  aside  from  high  priced  resi- 
dences, is  sold. 

For  example,  in  cities  of  moderate  size  improved  office 


i 


■"I  If 


72 


Modern  Real  Estate  Practice 


buildings  and  retail  store  property  is  expected  to  net 
from  five  to  six  per  cent  on  the  investment,  and  second 
class  business  and  rental  residence  property  a  somewhat 
higher  rate.  With  the  income  basis  in  mind  the  value 
ascribed  to  property  under  reasonably  good  conditions 
should  not  exceed  that  sum  upon  which  the  net  rental 
has  paid  a  reasonable  return  for  a  period  of  years.  The 
mistake  should  not  be  made  of  assuming  that  because  a 
certain  piece  of  property  has  changed  hands  for  a  certain 
sum  that  the  value  is  equal  to  that  sum,  or  that  the  prop- 
erty having  been  at  one  time  worth  a  certain  amount  is 
worth  that  sum  at  a  given  time. 

For  instance,  a  piece  of  property  of  any  character,, 
especially  residence  property  must  reasonably  approxi- 
mate the  character  and  value  of  its  surroundings.  For 
loaning  purposes  an  expensive  residence  in  a  neighbor- 
hood of  cottages  is  of  but  slightly  more  value  than  the 
smaller  houses,  and  a  retail  store  on  a  quiet  residence 
street  may  be  almost  valueless. 

The  price  paid  for  property  by  a  person  who  is  not 
compelled  to  buy  to  a  person  who  is  not  compelled  to  sell 
has  been  said  to  be  a  fair  definition  of  the  value. 

Amount  of  Loan. 

The  large  mortgage  companies  with  many  years  of 
practical  experience  have  established  the  fact  that  as  a 
rule  it  is  not  safe  to  loan  in  excess  of  fifty  per  cent  of  a 
conservative  valuation.  The  reason  for  this  is  that  in 
case  of  foreclosure  the  principal  of  the  debt  will  be  in- 
creased by  unpaid  interest,  taxes,  insurance  premiums, 
attorney's  fees,  court  costs;  and  it  is  further  reasonable 
to  suppose  that  before  the  end  of  the  foreclosure  and  re- 
demption period,  the  property  will  have  depreciated  in 
value  by  lack  of  care,  and  too,  property  sold  under  pres- 
sure does  not  as  a  rule  bring  its  real  value. 

Amortization. 

Because  of  the  shifting  conditions  and  possible  re- 
ductions in  values  many  of  the  mortgage  companies  to- 
day are  making  loans  on  the  installment  principle,  where- 
by a  loan  is  reduced  annually  or  oftener  by  the  payment 
of  a  stipulated  amount.  This  is  considered  a  most  valu- 
able feature,  because,  incidentally,  the  borrower  is  trained 
in  habits  of  saving  and  thrift,  and  not  infrequently  such 
payments  made  during  a  period  of  prosperity  have  been 
sufficient  to  bring  the  loan  well  within  the.  margin  of 


Dallas   School  of  Commerce 


73 


i  V 


safety  at  a  time  when  the  borrower  would  have  been  un- 
able to  liquidate  a  large  amount. 

The  attitude  of  investors  in  mortgages  in  the  past  has 
prevented  the  more  rapid  introduction  of  this  single  fea- 
ture, but  investors  are  coming  to  realize  that  the  diffi- 
culty of  reinvesting  these  payments  is  not  to  be  compared 
with  the  advantage  derived  through  the  constant  reduc- 
tion of  the  loan. 

Mora)  Hazard. 

While  real  estate  security  is  supposed  to  protect  the 
lender  fully,  it  is  most  essential  that  borrowers  must  be 
thrifty  individuals  whose  past  records  are  favorable  and 
whose  future  prospects  are  reasonably  good. 

A  bank  in  constant  touch  with  its  customers  can  af- 
ford to  make  loans  in  many  instances  purely  on  general 
reputation  and  business  ability.  But  investors  in  long 
time  mortgage  securities  must  have  the  protection  both 
of  the  moral  risk  and  the  real  estate  collateral  to  be  safe. 

Judging  by  the  past,  there  is  every  reason  to  believe 
that  the  recurring  periods  of  expansion  and  depression 
in  real  estate  will  continue.  It  is,  however,  equally  appar- 
ent that  land  will  always  remain  a  human  necessity.  While 
men  inhabit  the  earth,  homes  will  be  required  for  shelter 
and  business  buildings  for  the  exchange  of  commodities. 
Therefore,  funds  loaned  on  this  class  of  security,  when 
confined  to  a  conservative  percentage  of  the  value,  are 
serving  a  worthy  pui'pose,  and  are  secured  by  a  form  of 
collateral,  the  value  of  which  is  reasonably  sure  to  remain 
stable. 

Real  Estate  Mortgage  Bonds. 

In  the  past  real  estate  mortgages  have  had  a  more 
or  less  disorganized  market,  largely  owing  to  the  diffi- 
culty of  issuing  securities  of  standard  denominations,  such 
as  are  possible  to  railroad  corporation  bonds.  Mortgages 
as  a  class  lack  the  convertibility  possessed  by  bonds, 
therefore,  there  are  some  features  which  the  ordinary 
first  mortgage  does  not  supply,  due  to  certain  inherent 
limitations.  The  development  of  the  present  real  estate 
mortgage  bond  to  fill  these  needs  has  resulted. 

First,  there  are  limitations  as  to  minimum  amounts. 
The  man  with  one  hundred  or  two  hundred  or  five  hun- 
dred dollars  to  invest  is  not  likely  to  obtain  a  satisfac- 
tory mortgage  investment  of  the  usual  kind.  This  means 
that  the  great  aggregate  of  small  investors  who  have 


74 


Modern  Real  Estate  Practice 


;l  II 


from  one  hundred  to  one  thousand  dollars  to  invest  are 
out  of  the  field  of  investment  in  the  usual  type  of  mort- 
gage. 

Second,  there  are  limitations  as  to  maximum  amounts. 
In  loans  of  large  amounts  the  number  of  investors  de- 
crease at  an  increasingly  rapid  ratio  because  of  the  lack 
of  funds,  and  because  investors  of  large  amounts  are 
mindful  of  the  necessity  of  the  distribution  of  risks. 

These  limitations  have  brought  about  the  development 
of  the  mortgage  bond,  not  to  supplant  the  usual  type  of 
mortgage  investment,  but  to  supplement  it.  The  exist- 
ence of  the  mortgage  bond  is  justified  in  the  service  it 
performs  to  the  man  of  small  amounts  to  invest  and  the 
borrower.  Mortgage  bonds  can  be  made  upon  hundreds 
of  thousands  of  dollars  or  upon  millions  of  dollars  of  prop- 
erty, and  are  divided  into  a  number  of  small  bonds,  ac- 
cording to  the  particular  requirements  of  the  case.  This 
means  that  they  can  be  sold  not  only  in  one  locality  but 
throughout  the  country. 

In  addition,  it  means  that  the  investor  who  is  not  ex- 
perienced in  investment  matters  will  have  a  safe  invest- 
ment, because  mortgage  bonds  are  secured  by  first  mort- 
gage security,  and  as  a  rule  are  handled  by  large  concerns 
experienced  in  such  transactions  who  render  a  complete 
service  throughout  the  history  of  the  loan  until  it  ig  paid 
off  and  discharged  in  full. 

Building  and  Loan  Association. 

About  the  year  1795  there  was  begun  in  the  United 
Kingdom  the  organization  of  financial  institutions  known 
as  Building  Societies. 

These  were  organized  and  operated  for  the  purpose  of 
raising,  by  subscription  of  its  members,  a  stock  or  fund 
for  making  advances  to  members  upon  leasehold  estate 
by  way  of  mortgages. 

They  were  known  as  terminating  societies,  which 
means  that  the  members  paid  in  a  certain  period  of  time 
until  they  received  their  loans,  which  terminated  their 
connection,  and  when  the  original  members  joining  the 
society  had  accomplished  their  object  the  society  termi- 
nated. 

In  1846  important  modifications  were  effected,  and 
there  was  established  what  was  known  as  the  permanent 
plan,  which  meant  that  the  society  could  continue  indefi- 
nitely. 


Dallas   School  of   Commerce 


75 


*'  i    % 


\ 


These  institutions  had  their  inception  in  the  United 
States  in  1831,  and  became  known  as  Building  and  Loan 
Associations.  The  first  one  of  which  we  have  any  record 
was  estabhshed  at  Frankford  a  suburb  of  Philadelphia. 
Their  permanent  inception  took  place  between  1840  and 
1850,  and  they  have  grow^n  in  number  until  today  there 
are  between  8,000  and  9,000  building  and  loan  associations 
in  the  United  States,  with  a  total  membership  approxi- 
mating 5,000,000,  with  assets  totaling  in  excess  of  two 
and  one-half  billion  dollars. 

These  institutions  generally  are  corporations  organiz- 
ed for  the  purpose  of  aiding  their  members  in  the  pur- 
chase, improving  or  building  of  homes ;  and  of  encourag- 
ing habits  of  thrift  through  the  accumulation  of  savings. 

They  are  operating  today  in  general  on  the  permanent 
plan.  They  issue  to  the  members  certificates  represent- 
ing shares  of  stock  in  the  association  in  the  par  value 
of  $50.00,  $100.00  or  $200.00,  as  the  case  may  be.  Sub- 
scribers for  these  shares  pay  in  the  regular  m.onthly 
amount  per  share  as  required  by  the  association.  Shares 
are  considered  matured  when  the  amount  paid  in,  plus 
the  accumulated  profits,  equals  the  face  value  of  the 
shares.  The  subscriber  then  surrenders  his  certificate 
and  receives  in  cash  the  face  value  of  the  shares. 

Members  who  borrow  money  from  the  association  for 
the  purpose  of  buying  or  building  homes  are  required  to 
be  shareholders  in  the  association.  Such  borrowing  mem- 
bers discharge  their  obligations  to  the  association  by  con- 
stantly paying  in  the  monthly  dues  on  their  shares  until 
the  amount  paid,  plus  accumulated  profits,  equals  the 
face  value  of  the  loan,  at  which  time  the  certificate  is 
surrendered  and  the  debt  is  cancelled. 

The  housing  shortage  in  the  United  States  today  is 
considered  one  of  the  most  serious  perils  confronting  the 
nation.  The  housing  shortage  today  approximates  one 
and  one-half  million  homes.  The  building  and  loan  as- 
sociations are  rendering  perhaps  the  greatest  service 
toward  alleviating  this  condition,  as  they  are,  as  an  insti- 
tution, loaning  practically  all  of  their  funds  on  first  mort- 
gages on  homes. 

Encourages  Thrift. 

The  building  and  loan  associations  are  rendering  a 
service  of  inestimable  value  to  the  communities  in  which 
they  operate  by  encouraging  habits  of  thrift.    They  of- 


I 


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Modern  Real  Estate  Practice 


fer  to  the  small  investor  the  opportunity  of  investing 
small  amounts  in  first  mortgage  loans  upon  a  safe  basis. 
Their  plan  of  operation  provides  that  investors  of  small 
monthly  amounts  can  begin  immediately  to  derive  a  sub- 
stantial return  from  their  savings,  because  their  collec- 
tions in  large  numbers  of  small  amounts  can  readily  be 
loaned. 

They  offer  to  the  investor  a  most  attractive  margin  of 
safety  because  loans  are  made  in  such  amounts  as  have 
proven  by  experience  to  be  reasonably  safe.  In  most 
states  the  law  requires  that  building  and  loan  associa- 
tions shall  be  supervised  by  the  Banking  Department 
whose  duty  it  is  to  audit  their  books  at  regular  intervals 
for  the  protection  of  the  shareholders. 

The  well  established  building  and  loan  association  has, 
as  a  rule,  a  highly  perfected  loan  organization  with  of- 
ficers in  charge  who  are  thoroughly  qualified  to  handle 
the  funds  because  of  their  familiarity  with  real  estate 
values  and  their  knowledge  of  making  loans. 

The  investors  in  building  and  loan  associations  receive 
a  most  substantial  return  upon  their  investments.  This 
is  due  to  the  fact  that  most  associations  are  operated  up- 
on a  minimum  of  expense,  making  it  possible  for  the 
members  to  realize  practically  the  entire  earnings  from 
their  investments,  and  by  the  re-investment  of  interest  as 
it  is  accumulated  make  it  possible  for  a  substantial  for- 
tune to  be  accumulated  by  the  investment  of  comparative- 
ly small  monthly  sums. 

All  Building  and  Loan  Associations  operate  on  the 
Amortization  plan,  which  offers  distinct  advantages  to 
both  investing  and  borrowing  members. 

First,  by  the  collection  of  monthly  amounts  from  the 
borrowing  members,  the  outstanding  liability  of  the  Asso- 
ciation is  reduced  from  month  to  month,  thereby  increas- 
ing the  margin  of  safety  for  the  individual  investors. 

In  addition  it  makes  it  possible  to  offer  to  the  share- 
holders the  privilege  of  immediate  liquidation  of  their 
investments  upon  reasonable  notice,  if  necessity  demands. 

To  the  borrowing  member  it  offers  an  easy  plan  of  re- 
paying the  loan  and  avoiding  the  necessity  of  meeting  a 
large  obligation  at  any  time.  The  payments  are  not  in 
excess  of  the  amount  paid  in  rents  for  a  home  of  equal 
value.  They  make  it  possible  for  a  man  of  average  means 
to  own  his  own  home  and  become  his  own  landlord. 


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Dallas   School  of   Commerce 


77 


DEVELOPMENT  OF  SUBURBAN  PROPERTY 


By  Hugh  E.  Prather 

The  subject  assigned  me,  Development  of  Suburban 
Real  Estate,  covers  so  wide  a  range  that  were  one  to  at- 
tempt to  go  fully  into  the  whole  subject  much  more  time 
would  be  consumed  than  would  be  profitable  and  I,  there- 
fore, shall  try  to  cover  only  such  matters  as  pertain  to 
the  development  of  the  Highest  Type  of  Suburban  Resi- 
dence Properties,  where  the  owner  undertakes  the  com- 
plete development,  from  the  primitive  or  farming  state 
into  the  finished  residence  city.  This  is  as  I  see  it— -Su- 
burban Development  in  the  highest  sense  and  should 
challenge  the  best  efforts  of  the  one  who  essays  such  a 
task. 

I  feel,  too,  that  the  student  who  wishes  to  learn  some- 
thing of  the  methods  and  plans  necessary  in  work  of  this 
character,  would  wish  discussed  only  the  better  develop- 
ments in  suburban  property. 

If  I  can  at  once  be  acquitted  of  seeming  o  appear 
personal,  or  to  inject  myself  into  this  discussion,  I  shall 
feel  much  more  comfortable,  but  from  time  to  time  it 
may  be  necessary  for  me  to  refer  to  my  own  experience 
and  property.  This  will  be  solely  because  of  my  desire 
to  make  clear  certain  things  and  to  also  prove  certain 
assertions  as  practical  that  otherwise  might  be  construed 
as  purely  theoretical.  It  is  only  through  experience  that 
we  truly  learn,  and  all  that  I  shall  say  is  the  result  of 
fourteen  years  of  experience,  sometimes  rather  costly,  but 
for  the  most  part  an  experience  that  I  would  not  wish 
to  forget  and  on  which  I  look  back  with  th0  greatest 
pleasure  and  satisfaction. 

Developer. 

First — I  shall  say  a  word  about  the  Developer, — and 
please  keep  in  mind  that  we  are  discussing  the  develop- 
ment of  a  real  high-class,  modem,  residence  city — and  not 
the  mere  sub-dividing  into  lots  of  any  property  that 
chances  to  lie  adjacent  to  a  city.  In  that  case  the  party 
doing  the  sub-dividing  merely  installs  the  improvements, 
sells  the  property,  and  immediately  turns  his  attention 
to  other  matters. 

There  is  no  such  rosy  path  for  the  developer  of  the 


r 


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Modern  Real  Estate  Practice 


residence  city.  He  is  usually  a  person  who  is  not  alto- 
gether influenced  by  the  amount  of  money  that  he  may 
hope  to  make,  but  to  a  great  extent  must  he  be  influenced 
by  the  desire  to  create  something  that  is  worth  while, 
something  that  will  not  only  be  a  help  to  his  city,  but  a 
credit  to  his  vision,  his  faith  and  his  work.  For  the  man 
who  would  undertake  a  great  venture  of  this  kind  must 
have  vision  to  plan,  faith  to  sustain  him  during  the  many 
trying  times  through  which  he  must  pass,  and  courage 
to  finally  accomplish  his  task  in  a  creditable  manner. 

There  will  be  times  when  he  will  almost  despair  of 
going  on  to  a  successful  conclusion,  when  everyone  almost 
will  criticise  him;  when  his  own  associates  will  question 
his  policies  and  probably  criticize  him  for  being  too  lib- 
eral minded  about  most  things  pertaining  to  the  property, 
but  I  must  say  this, — and  here  I  change  the  subject,— 
if  the  man  who  heads  up  a  development  of  this  kind  is 
not  broad  minded  enough  to  be  liberal;  to  be  tolerant; 
to  be  willing  to  forget  the  immediate  profit  for  the  sake 
of  the  greater  one  later  on — whether  it  be  all  cash  or 
some  cash  and  some  satisfaction — if  he  be  not  a  man  of 
this  type,  he  had  best  not  attempt  this  work. 

Having  then  determined  to  develop  a  propei-ty  one  of 
the  first  questions  is  how  large  should  it  be?  The  com- 
bined experience  of  a  number  of  men  engaged  in  work  of 
this  kind  is  that  nothing  less  than  300  acres  will  answer 
all  requirements  for  an  ideal  residence  development  pro- 
ject where  all  things  that  pertain  to  such  a  community 
can  be  consummated  and  established. 

Roland  Park  in  Baltimore,  a  pioneer  development,  con- 
tains more  than  500  acres,  even  larger  acreage  is  desir- 
able where  a  Country  Club  Section  can  be  an  adjunct. 

In  Kansas  City,  the  Country  Club  Section  contains 
2,000  acres.  There  was  originally  one  Golf  Club  in  the 
property,  in  fact  the  development  came  as  a  result  of 
the  establishing  of  the  Golf  Club,  but  on  account  of  the 
large  amount  of  desirable  acreage  suiTounding  the  Club 
the  greatest  residential  development  has  resulted  so  that 
now  about  1,200  acres  have  been  fully  developed  and  four 
Golf  Clubs  have  been  established  within  the  2,000  acres. 

In  a  property  of  less  than  300  acres  one  can  hardly 
afford  to  attempt  a  community  development  and  expect 
to  make  it  a  success  financially.  Don't  misunderstand 
me — ^I  do  not  mean  to  say  it  cannot  be  successfully  sub- 


1 1 
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Dallas   School  of   Commerce 


79 


divided  and  sold  out.    But  I  am  adhering  to  my  subject 
— ^the  ideal  residence  city  development. 

Selection  of  a  Site. 

In  selecting  the  property  one  should  be  influenced  by 
a  number  of  considerations,  most  of  these  are  of  equal 
importance. 

1.  Nearness  to  the  City. 

2.  Direction  from  the  City. 

3.  Price  of  property  per  acre. 

4.  Topography  of  property. 

5.  Desirable  Physical  Features. 

6.  Thoroughfares  leading  to  property. 

7.  Character  of  property  along  routes. 

8.  Transportation. 

1.  The  nearness  to  the  city  is  a  most  important  point 
in  the  selection.  The  size  of  the  city  will  have  some  bear- 
ing on  this.  It  is  well  to  be  within  a  convenient  distance 
by  automobile  and  street  car.  For  cities  of  moderate  size, 
the  requirement  is  that  the  distance  be  not  too  great,  for 
transportation  is  not  so  highly  developed  as  in  larger 
cities,  consequently  two  to  four  miles  is  most  desirable. 

2.  The  direction  from  the  city  has  more  influence  on 
the  selection  than  one  would  first  imagine.  Most  cities 
grow  east  or  south — Highland  Park  is  well  situated  be- 
cause of  the  high  altitude  as  compared  with  Dallas.  Hun- 
ger Place  has  the  same  advantages.  Oak  Cliff  is  also 
admirably  situated;  indeed  Dallas  is  a  reversal  of  most 
well  accepted  rules,  and  the  growth  of  this  city  is  one 
of  the  reversals.  But  it  is  not  so  in  most  cities.  They 
grow  largely  in  one  or  two  directions;  therefore,  in  your 
selection,  if  your  site  is  attractive,  it  will  be  a  further  ad- 
vantage if  it  is  the  path  of  normal  growth  of  the  city. 

3.  The  price  per  acre  one  can  afford  to  pay  is  a  mat- 
ter that  can  be  determined  only  after  one  has  satisfied 
himself  about  two  important  matters.  We  shall  desig- 
nate them  as  A.  and  B. 

A.  First  a  complete  analysis  must  be  made  of  costs. 
Under  this  head  comes  original  cost  of  land;  cost  of  all 
development  work;  cost  of  carriage,  which  includes  in- 
terest on  all  moneys  invested,  taxes  of  every  nature  and 
cost  of  maintenance,  pending  sales;  selling  costs,  which 


80 


Modern  Real  Estate  Practice 


Dallas   School  of  Commerce 


81 


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includes  commissions  and  advertising,  office  expenses, 
such  as  bookkeeping  and  conveyancing;  overhead  ex- 
penses, which  must  be  apportioned  between  development 
costs  and  selling  costs,  if  one  is  to  keep  accurate  data  on 
which  to  base  decisions  for  the  future. 

B.  Second  a  fairly  accurate  estimate  of  the  price  at 
which  the  lots  can  be  sold — Not  the  price  you  wish  to 
place  on  them,  but  the  price  at  which  they  will  be  quickly 
absorbed. 

After  these  two  matters  have  been  thoroughly  con- 
sidered, and  the  amount  of  time  determined  in  which  all 
sales  can  be  made,  if  there  is  still  a  margin  of  profit  quite 
large,  one  is  then  in  a  position  to  accurately  figure  how 
much  money  per  acre  he  can  pay.  Do  you  really  suppose 
that  many  have  ever  accurately  gone  into  the  develop- 
ment of  a  large  sub-division  as  carefully  as  is  indicated 
in  the  above  analysis  ?  I  would  like  to  say  before  leaving 
this  subject  that  we  have  always  used  the  above  method 
before  actually  beginning  any  particular  development. 
Our  Engineer  has  not  only  always  computed  accurate 
costs,  but  have  in  many  instances  allowed  20  per  cent  ad- 
ditional for  things  that  we  could  not  see  at  the  time.  In 
most  instances  20  per  cent  has  been  a  safe  margin,  but 
in  many  other  instances  a  great  part  of  it  has  been  finally 
absorbed. 

4.  Topography  is  a  most  important  consideration.  The 
land  should  be  fairly  level,  but  should  have  enough  roll  to 
it  to  keep  it  from  being  flat.  Under  this  heading  I  should 
like  to  speak  of  the  character  of  the  soil.  It  is  most  de- 
sirable to  avoid  a  rocky  formation  (I  speak  from  ex- 
perience)— It  is  a  very  costly  development  which  en- 
counters the  handling  of  rock  in  any  form.  Then  too, 
it  is  unattractive  and  where  encountered  the  surface  of 
the  land  must  be  covered  with  soil  in  sufficient  quantities 
to  grow  grass  and  shrubs.  In  formation  of  this  kind,  all 
trees  must  be  planted  in  large  holes  and  the  bottoms  of 
these  holes  should  be  shattered  with  explosives  so  the 
roots  will  have  a  chance  to  reach  out  and  down. 

5.  It  is  needless  to  mention  again  that  any  desirable 
physical  feature  is  an  asset.  Native  trees  come  first — 
they  are  invaluable,  nothing  can  be  so  desirable  as  native 
trees.  Natural  streams  are,  of  course,  most  desirable 
but  seldom  in  Texas  are  they  found  so  placed  as  to  be 
of  use.     When  they  are  found  in  a  property,  the  plan 


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naturally  is  largely  based  on  them,  the  basic  lines  are  laid 
along  them  and  it  becomes  comparatively  easy  to  work 
out  the  balance  of  the  development. 

6.  Thoroughfares  leading  to  the  property  must  not 
be  overlooked.  Unless  the  site  is  readily  accessible  by 
automobile  along  direct  and  attractive  streets  over  which 
one  can  quickly  reach  his  home  it  will  be  a  great  handi- 
cap. The  more  thoroughfares  the  better.  No  better  ex- 
ample of  the  soundness  of  this  consideration  can  be  cited 
than  Hunger  Place  which  has  five  or  six  streets  leading 
directly  into  Dallas. 

7.  The  character  of  property  through  which  one  must 
pass  to  reach  your  development  is  another  important  con- 
sideration and  while,  other  things  being  favorable,  it 
would  not  be  a  deciding  factor,  yet  it  is  most  desirable 
that  the  property  along  the  route  be  of  such  character 
that  it  invites  rather  than  repels  the  traveler. 

8.  Of  greatest  importance  is  Transportation,  by 
street  car  or  interurban,  to  the  property.  One  can  pos- 
sibly develop  and  sell  property  in  these  days  of  automo- 
biles without  any  car  service,  but  it  will  mean  that  the 
sales  will  go  very  slowly  and  that  an  endless  amount  of 
dissatisfaction  will  result  to  those  who  do  buy.  We  all 
need  the  car  some  of  the  time;  some  of  us  prefer  to  use 
it  constantly  going  to  and  from  our  business  and  then 
we  must  have  consideration  for  the  servants  or  we  can- 
not hope  to  keep  them,  even  if  we  can  obtain  them  where 
there  is  no  car  service  or  indifferent  service.  A  property 
cannot  be  too  well  served  in  the  matter  of  car  lines,  as 
the  property  grows  it  must  have  additional  lines  or  the 
growth  will  be  very  slow.  It  may  cease.  Four  or  five 
blocks  is  about  the  maximum  distance  people  will  walk 
and  even  this  is  too  great.  Three  blocks  is  far  enough 
to  be  away  from  some  form  of  car  service  or  train  service. 

Planner. 

Having  selected  the  site  let  us  now  select  the  Planner. 
Or  perhaps  we  should  have  had  the  Planner  help  us  se- 
lect the  site.  I  am  sure  this  would  be  the  sensible  thing 
to  do,  for  a  man  who  makes  planning  a  profession  would 
have  far  more  judgment  in  the  choosing  of  a  site  than  any 
layman  or  any  real  estate  man — ^perhaps  I  should  have 
said  Realtor.  In  this  day  of  specialization  we  naturally 
would  turn  to  the  City  Planner,  rather  than  to  any  other 
man  for  a  plan.     He,  the  City  Planner,  will  have  con- 


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Modern  Real  Estate  Practice 


sideration  for  the  interest  of  the  city  of  which  our  prop- 
erty is  some  day  to  be  a  part,  and  this  is  something  often 
not  considered.  We  shall  then  select  some  one  of  the  out- 
standing men  of  that  profession  just  as  one  selects  a 
good  architect  to  plan  his  home,  rather  than  a  contractor. 
Making  the  Plan  requires  time  and  thought — it  re- 
quires detailed  engineering  data — there  must  be  no  guess 
work — accurate  measurements  must  be  known  and  re- 
corded. Plan  after  plan  will  be  drawn  and  discarded, 
severe  criticism  by  a  number  of  interested  persons  will 
finally  result  in  a  plan  which  is  acceptable.  Mr.  Kessler 
took  a  full  year  to  perfect  the  plan  for  Highland  Park 
West,  although  the  rough  draft  of  the  first  few  days  was 
substantially  the  same  as  the  finished  plan. 

Essentials  of  a  Flan  for  a  Modem  Suburban  Addition  of 

the  First-Class: 

A.  The  plan  should  be  attractive. 

It  should  follow  largely  the  natural  contours  of  the 
property  and  every  possible  effort  should  be  made  to  con- 
serve and  improve  all  natural  scenery.    Illustration. 

B.  The  plan  should  be  practical. 

Too  many  times  we  find  sub-divisions  laid  out  along 
impractical  lines,  no  regard  being  had  for  through  traffic. 

Streets  should,  if  possible,  swing  in  graceful  curves 
but  a  few  straight  streets  are  not  objectionable.  Lots 
should  be  rectangular  rather  than  odd  shaped,  if  one  de- 
sires the  maximum  yield  of  salable  property  per  acre,  but 
a  capable  planner  will  invariably  keep  away  from  a  mo- 
notonous checkerboard  development  by  occasionally  curv- 
ing a  street  in  a  graceful  fashion  without  losing  sight -of 
the  practical  workableness  of  the  plan. 

C.  Size  of  lots. 

The  modem  planner  takes  cognizance  of  the  auto- 
mobile and  provides  traffic  streets  amply  wide,  say  40 
feet,  to  care  for  a  maximum  load  of  traffic.  These  streets 
connect  in  a  convenient  way  with  established  traffic  ways 
leading  into  the  city.  They  also  provide  for  outlets  into 
the  adjacent  territory,  which  has  not  been  developed. 
Roads  leading  from  the  country  through  the  property, 
must,  of  course,  be  duly  considered.  From  these  large 
traffic  ways  lead  off  quiet,  and  I  should  like  to  stress  that 
word  —  quiet  —  residence  street;  much  narrower  in 
width,  say  30  feet,  or  even  25  feet  or  20  feet.    On  either 


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Dallas   School  of  Commerce 


83 


side,  rather  wide  sidewalk  and  tree  planting  spaces  must 
be  provided  for.  Here  away  from  the  noise  of  the  high- 
ways one  can  really  enjoy  home  life  in  the  fullest.  Here 
children  are  comparatively  safe  from  accident — more  and 
more  in  the  better  properties  in  the  leading  cities  are  the 
people  refusing  to  buy  on  traffic  streets  and  I  am  in- 
formed by  a  member  of  our  Conference  that  he  is  obtain- 
ing the  highest  prices,  not  on  the  boulevards  or  heavily 
traveled  thoroughfares,  but  on  the  very  quiet,  compara- 
tively little  traveled  residence  byways.  I  say  byways 
in  contra-distinction  to  the  highv/ays  or  traffic  streets. 

D.  Parks,  Playgrounds,  School  Lots,  Church  Sites, 
Golf  Clubs,  Riding  Schools,  Bridle  Paths,  Business  Sec- 
tions, Gasoline  Stations. 

E.  Water  supply,  conveniences,  reseiTation  strips  vs. 
alleys,  no  poles  on  streets. 

D.  No  modem  city  for  residence  is  complete  unless 
it  has  those  features  with  which  we  are  all  familiar. 

First — Schools,  and  in  planning  we  must  set  aside 
available  sites  for  ample  school  facilities.  In  this  con- 
nection, I  would  have  you  profit  by  the  mistakes  many 
of  us  have  made,  and  make  provision  for  playgrounds  for 
the  children.  More  and  more  do  we  realize  that  play- 
grounds are  one  of  our  greatest  assets  in  the  proper  rear- 
ing of  our  children,  really  an  insurance  against  the  cor- 
ruption of  the  morals  of  our  youth,  especially  where  super- 
vision of  such  playgrounds  is  had. 

Churches — Then  the  Churches  must  be  located  con- 
veniently, preferable  in  our  midst.  This  can  be  and  is 
being  done  successfully  in  many  properties;  when  I  say 
successfully  I  mean  without  any  detriment,  from  a  sales 
viewpoint,  to  any  surrounding  property.  To  do  this,  how- 
ever, requires  careful  architectural,  as  well  as  landscape 
planning.  It  has  been  done  most  successfully  in  Forest 
Hills  Garden,  just  outside  New  York  on  Long  Island. 

Parks — We  must  have  parks,  they  cannot  be  afforded 
in  small  properties.  In  large  properties  they  can  be 
charged  off  in  some  way  as  a  part  of  the  development 
cost.  The  amount  of  land  set  aside  for  parks  must  be  in 
proportion  to  the  size  of  the  development.  In  Highland 
Park  so  far,  20  per  cent  of  all  property  is  set  aside  for 
parks.    This  is  rather  unusual,  I  believe,  as  compared 


t 


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Modern  Real  Estate  Practice 


with  other  similar  developments,  and  was  largely  the  re- 
sult of  the  character  of  the  property.  A  great  part  of 
the  property  lent  itself  admirably  to  park  use  rather  than 
to  purpose  of  residence.  Five  per  cent  of  properties 
would  be  a  fair  proportion  for  parks,  it  will  also  more  than 
repay  you  for  using  it  in  this  way. 

Golf  Clubs — Golf  Clubs  are  the  most  desirable  fea- 
tures that  can  possibly  be  connected  with  a  suburban  de- 
velopment. Nothing  else  can  possibly  have  so  beneficial 
an  influence  on  a  property.  The  reason  is  plain,  I  am 
sure;  the  American  Business  Man  wants  his  Golf.  It  is 
fast  becoming  his  only  hope  for  recreation  and  exercise. 
He  wants  it  near  his  home  so  he  can  plan  late  and  yet  be 
in  time  for  dinner.  The  whole  American  family  are  tak- 
ing to  golf  and  consequently  properties  near  Golf  Clubs 
are  popular  with  home  builders.  If  I  were  to  name  the 
chief  reason  for  the  success  of  Highland  Park,  I  should 
unhesitatingly  say  the  Country  Club.  Mr.  J.  C.  Nichols 
has  built  three  in  his  property,  these  in  addition  to  the 
Old  Country  Club. 

Horseback  Riding — Another  feature  that  is  fast  be- 
coming an  important  one  is  horseback  riding.  The  ladies 
do  not  all  wish  to  play  golf,  some  wish  to  ride.  Many  men 
are  also  becoming  interested.  It  is  wonderfully  fine  for 
children  and  while  some  may  not  care  for  it,  I  predict 
that  there  will  before  long  be  hundreds  of  horses,  either 
privately  owned  or  for  hire  here  in  Dallas.  Therefore, 
on  account  of  this  recurrence  to  an  old  custom  we  should 
provide  bridle  paths  for  riders  in  our  modem  subdivision 
and  I  am  at  present  seriously  considering  the  building  of 
bridle  paths  in  the  Highland  Park  West  of  our  property 
which  we  will  soon  begin  developing. 

Business  Section — Something  we  have  overlooked  as 
not  necessary  is  a  suburban  business  section.  It  is  a  real 
necessity.  We  should  plan  for  it  in  an  intelHgent  way. 
We  should  control  the  architecture  of  the  buildings  and 
the  grouping  of  them.  Recently  on  Preston  Road  we  had 
a  part  in  the  planning  of  the  stores  erected.  Our  Archi- 
tect made  one  plan  outright  which  we  gave  to  the  owner 
and  in  another  case  we  contributed  towards  the  Archi- 
tect's fee,  having  a  voice  in  the  approval  of  the  plan.  This 
was  because  we  were  trying  to  work  out  an  attractive 
situation  where  if  left  wholly  to  the  individuals  we  felt 
something  less  attractive  might  have  resulted. 


t 


«> 


Dallas   School  of  Commerce 


85 


Lake  Forest,  Illinois,  has  a  wonderful  store  develop- 
ment where  English  Architecture  has  been  used  to  ob- 
tain more  pleasing  results  in  the  way  of  a  suburban 
business. 

Under  the  head  of  necessary  business,  as  may  be  men- 
tioned, Groceries,  Meats,  Drugs,  Cleaning  Establishments, 
Restaurants,  Novelty  Shops,  Greenhouses,  Nurseries, 
(making  a  specialty  of  landscape  planting  and  selHng 
shrubs).  Hardware  Stores,  Barber  Shops  (where  special 
attention  is  given  children)  and  there  is  a  growing  need 
in  the  larger  developments  for  offices  for  Doctors, 
especially  for  Dentists  and  Specialists.  Many  kinds  of 
business  have  no  place  in  or  near  large  residence  prop- 
erties, but  all  those  above  mentioned  are  really  needed 
and  are  thriving  in  a  number  of  cities  I  can  mention. 
Gasoline  Stations  are  of  course  necessary  as  are  one  or 
two  first-class  garages  where  emergency  work  can  be 
done  on  cars  and  tire  service  given. 

Water  Supply — ^A  permanent  and  adequate  supply  of 
pure  water  is  absolutely  necessary.  No  property  can  suc- 
ceed without  this.  Either  the  developer  must  provide 
an  independent  supply  or  he  must  rely  on  the  City  Water 
for  serving  his  purchasers.  If  one  is  inside  the  city  this 
can  be  arranged;  if  outside  it  is  rather  difficult.  Our 
own  property  was  far  beyond  the  city  when  we  began  our 
work  and  we  were  compelled  to  drill  a  small  well  and  in- 
stall a  pump.  We  soon  found  that  we  were  really  in  the 
water  business  and  we  began  to  enlarge  our  supply  and 
our  pumping  facilities  until  now  we  supply  about  600,000 
gallons  of  water  per  day.  One  should  be  careful  to  hi- 
stall  a  distribution  system  that  is  a  standard  one,  for 
some  day  the  property  will  become  a  part  of  the  city 
and  only  standard  pipe  and  fire  hydrants  will  be  accept- 
able to  a  modern  city.  Plans  must  also  provide  for  all 
other  conveniences  such  as  telephones,  electric  lights, 
gas  and  sewer  mains. 

Sewerage  must  be  disposed  of,  or  run  into  the  City 
mains  as  is  done  by  Highland  Park.  Each  connection 
there  pays  $4.00  per  annum,  an  extra  charge  is  allowed 
our  Company  of  $2.00  per  annum  for  which  we  agree  to 
repair  and  maintain  all  mains  and  collect  all  fees.  The 
City  of  Dallas  disposes  of  all  sewerage  from  Highland 
Park. 

In  the  modem  plan,  alleys  are  eliminated  and  reserva- 


\ 


86 


Modern  Real  Estate  Practice 


tion  strips  along  the  rear  of  lots  are  platted.  Here  are 
placed  all  public  service  equipment  and  all  water  and 
sewer  pipe.  In  most  places  poles  are  erected  here  and 
never  in  the  streets  unless  it  be  side  streets  where  there 
are  car  lines.  A  single  line  of  poles  usually  serves  for 
both  phone  and  electric  wires. 

Restrictions — Restrictions,  or  as  we  like  to  call  them, 
Protections,  are  the  life-blood  of  a  high-class  develop- 
ment. They  invite  people  to  build  because  they  protect. 
They  guarantee  one  against  the  encroachment  of  unde- 
sirable neighbors  and  surroundings.  They  are  the  ex- 
planation of  the  success  of  all  the  best  sub-divisions. 
Without  them  there  would  never  have  been  such  things. 
The  inauguration  of  them  created  the  first  real  Residence 
City.  One  must  give  a  great  deal  of  time  and  thought 
to  the  formation  or  declaration  of  restrictions.  To  know 
what  others  have  done  is  the  best  way  to  inform  one's 
self  of  what  is  best  for  one.  All  developers  are  glad  to 
send  copies  of  their  contracts  and  deeds  which  cover  their 
entire  requirements. 

The  kind  of  houses  one  may  build;  the  distance  from 
the  street;  or  from  the  side  lines;  whether  fences  may 
be  built ;  where  out-houses  may  be  erected ;  restrictions  as 
to  race,  etc.,  all  these  points  must  be  covered  fully  and 
clearly  before  one  begins  to  offer  one's  property  for  sale. 
All  this  entails  the  advice  of  a  competent  lawyer  who 
must  spend  weeks  in  investigating  what  others  call  for 
in  their  deeds  and  contracts.  You  will  also  need  this  law- 
yer until  your  last  lot  is  sold.    Don't  forget  that. 

Referring  to  the  restrictions  as  to  the  house  that 
may  be  built  on  any  given  lot,  most  developers  are  now 
merely  "reserving  the  approval  of  plans."  The  approval 
of  plans  is  very  broad  and  confers  on  the  seller  autocratic 
power  of  decision.  It  is  the  best  method,  for  to  say  that 
a  house  shall  cost  not  less  than  $10,000  or  $5,000  means 
very  little  in  these  years  of  fluctuating  material  markets 
and  smooth  and  unscrupulous  builders.  I  do  not  say  all 
builders,  mind  you.  The  approval  of  plans  is  positive  and 
final. 

You  should  also  incorporate  into  your  contracts  and 
deeds  and  agreement  that  the  purchaser  shall  pay  a 
small  annual  maintenance  charge  per  front  foot.  This 
will  be  about  7  to  10  cents  per  front  foot.    This  creates  a 


V     * 


i 


Dallas   School  of   Commerce 


87 


fund  that  is  administered  by  a  Board  of  Trustees  elected 
by  the  property  owners  who  shall  see  that  all  grass  side- 
walk spaces  are  kept  cut,  trees  looked  after  and  replaced 
and  all  shrubs  trimmed  and  trash  hauled  away  from  gut- 
ters. Also  little  parks  are  maintained  from  this  fund. 
If  there  is  a  Village  or  City  Government  this  fund  is  still 
a  necessary  and  desirable  thing.  Put  it  in  your  contract 
and  deeds.  Self -perpetuating  restrictions  are  better  than 
limited  ones. 

Abstracts  or  title  policies  with  each  lot  are  necessary 
in  selling  and  care  must  be  taken  to  perfect  your  title 
before  buying.  You  must  be  ready  to  give  perfect  title 
to  your  purchaser  without  the  slightest  delay.  A  title 
policy  is  best. 

I  shall  not  talk  in  detail  about  the  actual  physical 
work  of  development  more  than  to  say:  Get  you  a  most 
competent  engineer,  preferably  a  resident  engineer,  one 
who  is  on  the  site  at  all  times.  If  you  are  going  ahead 
with  your  work  on  a  fairly  large  scale  you  will  have 
enough  work  to  keep  you  busy.  Profiles  of  streets  and 
water  and  sewer  take  up  much  of  his  time.  Careful  study 
and  accuracy  will  save  you  much  money.  A  poor  engineer 
is  worse  than  none.  Most  work  can  be  done  more  econom- 
ically by  contract.  Separate  your  contracts.  Let  a  sepa- 
rate contract  for  your  dirt  work  and  carefully  plan  what 
you  are  going  to  do  with  the  dirt  before  you  start,  thus 
avoiding  the  moving  of  it  the  second  time.  Contract  your 
paving,  sidewalks  and  other  work,  if  possible,  though  I 
like  to  do  my  own  water  and  sewer  work  for  the  reason 
that  I  then  know  that  I  am  not  going  to  be  bothered  with 
leaks  and  faulty  construction,  after  it  is  finished.  Some 
contractors  on  this  class  of  work  are  not  so  awfully  con- 
scientious. 

Plant  trees,  plant  shrubs,  if  necessary,  and  cut  all 
weeds.  Keep  the  property  looking  clean  and  good.  Fin- 
ish your  property — leave  nothing  undone.  Make  it  the 
best  to  be  had  and  you  can  almost  name  your  own  price. 

Sectional  Development — 50  acres  at  a  time. — Different 
classes  of  property  make  competition  or  contrast  in  the 
property.  In  a  large  property  all  of  it  cannot  be  develop- 
ed for  the  highest  priced  residences.  Set  aside  a  section 
for  moderate  priced  homes;  also  a  section  for  cottage 
homes.  In  this  way,  you  get  a  well  balanced  community 
and  having  several  classes  of  property  you  naturally  ap- 


i  ••- p 


S8 


Modern  Real  Estate  Practice 


peal  to  more  people  and  sell  your  property  out  in  a  shorter 
time,  thereby  you  turn  your  goods  faster,  which  spells 
profit.  It  is  desirable  to  have  some  streets  where  cot- 
tages may  not  be  built,  for  many  people,  who  construct 
large  homes,  want  like  homes  to  surround  them.  Also  we 
have  tried  brick  or  hollow  tile  construction  exclusively, 
on  certain  streets,  with  good  selling  results  and  much 
satisfaction  to  the  builders. 

Street  lights  and  intensive  development  of  parks  is 
best  left  to  the  community  after  it  is  organized.  There 
is  a  point  in  expenditure  where  one  who  develops  must 
stop  or  lose  money.  A  great  deal  of  idealism  is  necessary, 
if  one  expects  to  make  a  real  property,  but  this  must  be 
balanced  by  practical  considerations. 

Selling. — Although  my  subject  does  not  cover  more 
than  the  development,  yet,  I  cannot  close  without  saying 
a  word  about  selling.    We  have   tried   various   plans  in 
selling  our  property  and  from  experience  extending  over 
many  years  we  have  definitely  come  to  the  conclusion 
that  in  order  to  do  full  justice  at  all  times  to  a  large 
residential  development  it  is  absolutely  necessary  that  a 
well  organized  sales  force,  which  shall  specialize  in  this 
particular  property,  and  no  other,  is  necessary.    In  fact, 
it  is  not  only  my  experience,  but  it  is  the  exi>erience  of 
any  number  of  men  who  I  could  mention,  that  a  sales  or- 
ganization, specializing  in  the  sale  of  the  property,  is  the 
correct  method  for  handling  it  in  a  most  efficient  and 
economical  manner.    While  there  are  a  great  many  ex- 
cellent sales  organizations  which  do  general  business,  and 
they  are  found  in  every  community,  I  do  not  believe  that 
with  their  varied  interests  in  the  real  estate  business  thai 
they  can  concentrate  sufficiently  on  a  property  to  do  it 
full  justice,  that  is,  if  it  is  a  very  large  development.    Al- 
so we  have  tried  the  method  of  having  no  particular  firm 
work  on  a  property  and  placing  it  for  sale  in  the  hands 
of  all  real  estate  agents.    We  have  found  this  method  is 
to  be  almost  without  any  results  and  it  was  discontinued 
a  short  time  after  its  inauguration.     We    have   finally 
come  back  to  the  plan  as  outlined  above, — a  selling  or- 
ganization specializing  entirely  in  the  sale  of  our  own 
property  and  in  resales  of  every  kind  within  the  property. 
I  would  like  to  stress  the  last  statement,  the  resale  of  all 
property  within  the  development,  for  if  a  property  is  to 
be  active  and  prices  are  to  be  maintained  and  advanced, 
then  those  parties  who  desire  to  sell  must  find  a  ready 


I 


Dallas   School  of   Commerce 


m 


i 


ff    f   t 


'« 


market  for  their  offerings,  and  it  is  only  by  the  co- 
operation of  the  developer  and  his  selling  force,  as  well 
as  through  the  help  of  all  other  agents  that  this  can  be 
done,  consequently  we  use  every  endeavor  to  find  a  mar- 
ket for  all  property  which  is  offered,  whether  it  be  ours 
or  whether  it  be  the  property  of  others. 

Community  Spirit. — In  closing  I  want  to  finally  speaK 
about  community  spirit.  I  first  started  to  say  that  this 
is  something  new  under  the  sun,  but  on  second  thought 
I  wish  to  change  that  and  call  it  a  recurrence  to  an  old 
time  honored  feeling  of  neighborliness. 

As  we  have  moved  gradually  from  the  country  into 
our  cities  until  it  is  sometimes  a  serious  problem  as  to 
who  shall  till  the  soil,  our  communities  have  grown  to 
be  so  large  and  so  complex,  with  such  a  diversity  of  in- 
terests and  such  a  mixture  of  peoples,  that  gradually 
there  has  ceased  to  be  any  spirit  of  neighborliness  and 
friendliness.  It  has  come  to  be  the  case  that  the  man 
next  door  is  hardly  known  to  you,  and  if  he  is  it  is  merely 
a  speaking  acquaintance.  This  extends  into  the  house- 
hold, your  wife  does  not  know  his  wife  and  his  wife  does 
not  know  your  wife,  and  so  this  coldness  and  indifference 
on  the  part  of  every  one  has  grown  up  in  the  cities  to  a 
point  where  there  could  not  be  said  to  be  much  friendli- 
ness or  neighborly  feeling  existing.  There  have  been  many 
real  reasons  why  this  has  come  about,  and  most  of  us 
have  come  to  the  conclusion  that  it  will  never  be  over- 
come in  cities  generally.  But  this  is  not  the  case  in  su- 
burban residence  cities,  where  the  protections  are  of  such 
a  nature  that  they  invite  people  of  a  class — and  by  that 
I  do  not  mean  too  exclusive  a  class — but  home-loving 
hearts,  people  who  want  to  get  out  of  the  crowded,  dirty, 
friendless  city,  into  the  great  outdoors  and  into  God's 
fresh  air.  It  just  naturally  happens  that  after  your  prop- 
erty is  developed  to  a  certain  stage,  you  will  sum  up  the 
class  of  people  that  are  living  within  your  gates,  you  will 
inevitably  find  almost  without  exception  in  protected 
properties,  that  each  one  of  the  people  therein  has  the 
greatest  heartfelt  desire  to  be  friendly  with  the  man  next 
door,  for  they  feel  that  their  children  are  perfectly  safe 
in  playing  with  the  children  next  door  and  one  thing 
leads  on  to  another  until  all  this  develops  something 
which  I  have  referred  to  above,  called  COMMUNITY 
SPIRIT,  where  each  one  in  the  property  becomes  an  ad- 
vocate of  the  property  and  exerts  himself  to  do  his  some- 


r 

4 


"^^ 


90 


Modern  Real  Estate  Practice 


thing  or  her  something  towards  the  propagation  of  this 
neighborly  feehng.  One  can  readily  see  that  with 
everyone  in  the  property  in  such  a  frame  of  mind  it  is 
the  pleasantest  and  easiest  sort  of  task  to  do  a  number 
of  community  things  which  cannot  be  done  in  mixed 
communities,  for  the  spirit  of  co-operation  is  lacking. 
Having  this  thought  in  mind  many  of  the  leading  resi- 
dence cities  of  the  country  have  laid  out  elaborate  plans 
for  the  development  of  the  Community  Spirit  and  are 
doing  things  worth  while. 

Forest  Hills  Gardens  on  Long  Island,  just  outside  of 
New  York  City,  has  organized  a  Celebration  Association, 
composed  of  everyone  in  the  property.  Each  contributes 
a  small  amount  per  annum,  say  $1.00,  which  goes  into  a 
fund  administered  by  three  Trustees  for  the  Celebration 
Committee.  On  the  Fourth  of  July,  their  greatest  cele- 
bration takes  place  and  consists  of  a  fitting  celebration 
of  the  National  Holiday  by  having  an  annual  picnic,  pa- 
rade and  public  addresses  by  Nationally  prominent  peo- 
ple. I  remember  on  one  occasion  Theodore  Roosevelt  was 
the  principal  speaker,  about  two  years  before  his  death. 
Their  other  celebration  is  the  Christmas  Carols  on  Christ- 
mas Eve,  where  practically  all  of  the  younger  members 
of  the  community,  after  being  thoroughly  trained  for 
weeks,  march  through  the  streets  singing  Christmas 
Carols.  If  one  stops  to  analyze  this  sort  of  program  he 
cannot  help  but  be  impressed  with  the  tremendous  value 
of  it  in  binding  together  the  interests  and  sympathies 
of  the  people.  There  is  no  amount  of  paid  advertising  in 
the  world  that  can  take  the  place  of  just  a  little  bit  of  this 
community  spirit,  for  others  on  the  outside  looking  in  are 
envious  of  the  neighborly  feeling  that  they  see  displayed 
and  consequently  are  drawn  irresistibly  towards  the  prop- 
erty, "with  the  result  that  those  who  have  inaugurated 
the  same  are  more  than  repaid  for  their  trouble. 

Other  things  along  this  line  are  the  Garden  Players 
of  Forest  Hills,  who  organized  within  the  property,  and 
gave  monthly  a  play  of  some  kind  in  the  auditorium  of  the 
Hotel.  Community  Centers  and  Community  Clubs,  as  well 
as  organizations  like  Improvement  Leagues,  and  Mothers' 
Clubs,  help  to  further  develop  this  spirit  in  a  wonderful 
way.  In  summing  up  all  of  those  things  that  are  of  para- 
mount interest  and  importance  in  the  development  of  a 
property,  I  unhesitatingly  place  the  development  of  the 
Community  Spirit  as  the  greatest  of  all. 


Dallas   School  of   Commerce 


91 


HISTORY  AND  DEVELOPMENT  OF  BUSINESS 

PROPERTY 


By  Fletcher  F.  McNeny. 

In  the  discussion  of  this  subject  we  shall  confine  our 
observations  to  the  history  and  development  of  business 
property  in  America,  changing  the  old  adage  to  "As  goes 
America,  so  goes  the  universe."  Of  course  the  history 
and  development  of  property  in  this  country  is  not  dif- 
ferent from  that  of  other  nations,  as  the  same  things 
that  enter  into  the  value  of  property  today  entered  into 
the  value  of  property  centuries  ago.  Human  nature  is 
the  same  in  every  age,  the  change  in  men  is  but  a  matter 
of  environment. 

Since  the  beginning  of  man,  there  have  always  been 
markets  where  they  bought,  sold,  bartered  and  exchanged 
their  wares.  In  the  medieval  ages  they  met  for  this  pur- 
pose at  the  port,  ferry,  or  the  cross  roads,  and  later  at 
the  store,  villages,  towns,  and  now  in  the  great  metro- 
politan cities  of  this  country.  We  remember  back  in  bib- 
lical times  they  met  in  the  synagogues,  so  we  find  a  de- 
mand for  business  property  more  than  1900  years  ago, — 
and  I  have  no  doubt  there  were  realtors  in  those  days  just 
as  there  are  today.  Since  the  early  landing  of  the  Pil- 
grims there  has  been  in  this  country,  as  in  others,  the 
demand  for  what  we  now  call  community  centers,  where 
men  may  gather  for  social  as  well  as  commercial  rela- 
tions, and  in  those  days  for  means  of  communication  as 
well.  It  was  through  this  means  of  communication  that 
the  Boston  Pea  Party  was  held  and  we  recall  how  quickly 
the  news  spread  from  Nan^agansett  Bay  to  the  remote 
hills  of  the  White  Mountains,  with  the  result  that  prac- 
tically the  entire  populace  of  New  England  quickly  as- 
sembled in  Boston  to  acclaim  their  loyalty  to  this  country, 
as  well  as  their  freedom  from  the  oppressive  taxation  of 
England. 

So  the  community  centers  of  today  are  as  old  as  man- 
kind, and  have  served  the  successive  generations  in  more 
highly  developed  and  civilized  states. 

As  the  populace  gathered  at  these  various  ports,  fer- 
ries and  cross  roads,  for  their  respective  community  cen- 
ters, the  demand  came  for  markets,  stores,  shops,  etc.. 


*  'I 


92 


Modern  Real  Estate  Practice 


• 


and  hence  the  acquisition  of  suitable  land,  by  purchase  or 
otherwise,  to  accommodate  their  need,  so  in  this  way, 
as  has  been  explained  in  a  previous  lecture  on  the  de- 
velopment of  real  property,  man  became  the  owner  of  real 
property  for  business  purposes,  or  what  we  might  term 
today,  highly  developed  business  property  in  the  twenty- 
four  hour  district. 

In  those  days  the  community  centers  grew  into  vil- 
lages and  the  villages  into  towns,  in  a  haphazard  way, 
for  no  one  expected  them  to  ever  grow  larger,  nor  knew 
how  to  plan  them  if  they  did.  It  soon  became  quite  ap- 
parent however  that  the  villages  located  at  the  ports, 
and  on  the  main  rivers  and  highways,  would  come  in  for 
the  larger  volume  of  trade,  so  those  commercially  in- 
clined began  to  seek  the  most  advantageous  locations  in 
the  villages  which  gave  the  most  promise,  and  the  Realtor 
soon  found  a  healthy  demand  for  his  prominent  comer 
lots  in  the  business  district. 

Work  was  begun  to  get  more  highways,  and  establish 
larger  trade  territories  by  reaching  out  through  these 
highways  into  the  interior.  With  the  invention  and  de- 
velopment of  steam  power  it  was  soon  seen  that  the  rail- 
roads would  revolutionize  trade  conditions  in  this  countiy, 
and  while  the  railroads  wanted  to  get  into  the  villages 
it  was  also  realized  that  the  transportation  lines  would 
develop  trade  centers  wherever  they  operated.  And  so 
it  is  today,  the  main  lines  of  transportation,  whether 
water  routes,  highways,  railroads,  electric  hnes,  or  main 
arteries  of  traffic  in  our  great  cities  firmly  and  definitely 
establish  the  value  of  our  business  property. 

As  the  great  railroads  and  highways  began  to  estab- 
lish trade  centei-s  in  the  villages,  they  rapidly  grew  into 
larger  cities,  which  of  course  proportionately  enhanced 
the  v^ue  of  their  business  property,  for  the  more  people 
any  property  can  serve,  the  greater  its  value.  And  so 
today  we  find  our  merchants  seeking  locations  on  the 
most  crowded  thoroughfares  which  will  serve  the  great- 
est number  of  people,  and  here  ^ve  must  differ  with  Emer- 
son, who  said, 

"If  a  Man- 
Can  preach  a  better  sermon, 
Write  a  better  book,  or 
Make  a  better  mouse  trap 
Than  his  neighbor; 


Dallas   School  of   Commerce 


It 


i 


Tho'  he  build  his  house  in  the 

woods — 
The  world  will  make  a 
beaten  path  at  his  door.' 


ti 


We  cannot  altogether  agree  with  this  theory,  beautiful 
as  it  is,  for  in  this  modem  day  of  commercialism,  no  mat- 
ter how  good  a  mouse  trap  a  man  can  build,  he  wants  a 
location  in  the  most  congested  district  where  the  traffic 
count  shows  the  greatest  purchasing  power. 

Innumerable  things  enter  into  the  value  of  business 
property,  which  to  the  casual  observer  would  seem  almost 
trifles.  For  instance,  you  will  recall  the  country  town 
where  every  store  had  a  different  floor  level  and  the  side- 
walk a  veritable  stairway, — up  three  or  four  steps  to 
one  store,  and  down  four  or  five  to  another.  Imagine  the 
modem  merchant  whose  store  level  is  not  flush  with  the 
sidewalk.  On  Elm  Street  in  this  city,  a  well  established 
merchant  outgrew  his  25  foot  store  which  was  one  step 
above  the  sidewalk.  He  leased  the  adjoining 
twenty-five  foot  store  and  enlarged  his  estab- 
lishment. The  new  store  was  flush  with  the  side- 
walk and  the  front  was  made  a  duplicate  of  the  original 
store.  The  merchant  told  me  that  about  75%  of  his 
business  originated  from  the  side  of  his  original  store, 
and  yet  90%  of  his  customers  w^alked  25  feet  further 
up  the  street  to  enter  the  store  flush  with  the  sidewalk, 
rather  than  step  up  one  step.  Of  course  this  was  done 
unconsciously.  But  in  this  modem  day  of  scientifically 
dealing  with  our  problems  of  commerce,  and  industry,  an 
effort  is  constantly  being  made  to  reach  that  subconscious 
mind,  to  ascertain,  analyze  and  develop  that  power  which 
makes  a  man  do  a  thing  unconsciously. 

The  Realtor  should  have  a  thorough  knowledge  of  the 
past  history  of  his  city,  its  present  growth  and  develop- 
ment, and  its  future  possibilities.  He  should  know  the 
strength  of  its  financial  institutions  as  manifested  by 
their  clearing  house  receipts — the  general  volume  of  mail 
handled  by  the  postal  department  as  shown  by  its  re- 
ceipts— the  climatic  conditions — ^the  beginning  and  length 
of  the  four  seasons — ^the  average  temperature  and  precipi- 
tation of  each — ^the  different  nationalities  represented  in 
the  city,  together  with  their  customs  and  peculiarities — 
the  volume  of  traffic  and  its  purchasing  power. 

Business  districts  grow  along  the  lines  of  least  resist- 


i  i. 


1 1 

lii 


) 


94 


Modern  Real  Estate  Practice 


ance  toward  the  larger  residence  sections,  and  rapidly 
enhance  the  value  of  the  property  upon  which  it  en- 
croaches, converting  old  residence  districts  into  semi-busi- 
ness property, — and  later  business  property.  The  de- 
velopment, however,  is  natural,  normal  and  anticipated 
so  far  in  advance  that  the  economic  loss  in  improvements 
is  almost  trivial.  I  mean  by  this  that  the  owners  of  close- 
in  residence  property  soon  see  the  trend  of  development, 
and  knowing  that  the  utility  of  the  property  will  soon  be 
changed  by  the  encroaching  business  district,  will  not 
spend  money  on  alterations  or  new  improvements,  there- 
by reaping  the  full  benefit  of  the  increased  value  with  a 
minimum  loss  in  depreciation.  The  development  can  and 
should  be  encouraged  by  the  erection  of  buildings  suit- 
able for  business  purposes. 

The  wise  investor,  through  his  dependable  Realtor, 
who  early  acquires  substantial  holdings  in  advance  of  the 
city's  gro\vth,  erecting  buildings  commensurate  with  the 
potential  needs  of  the  district,  is  laying  the  foundation 
of  a  great  fortune  for  his  and  posterity's  use.  In  this 
connection  it  may  be  interesting  to  you  to  know  that  60% 
of  the  world's  wealth  is  represented  by  investments  in 
real  estate.  It  is  likewise  true  that  a  large  per  cent  of 
those  who  have  accumulated  a  comfortable  portion  of  this 
world's  goods  have  laid  the  foundation  of  their  fortunes 
by  investing  their  savings  in  well  selected  real  estate. 

Some  forty  years  ago,  a  man  by  the  name  of  F.  B. 
Hite,  Hving  in  Houston,  Texas,  died,  leaving  a  wife  and 
two  children.  His  earthly  possessions  consisted  of  an  in- 
surance policy  for  $2000.00.  The  wife  took  the  insurance 
money  and  went  out  Main  Street  in  Houston  until  she 
could  buy  a  fifty  foot  lot  for  $1000.00.  Not  wanting  to 
put  all  of  her  eggs  in  one  basket,  she  decided  to  come  to 
the  promising  little  village  of  Dallas  and  invest  the  re- 
maming  $1000.00.  She  went  out  Elm  Street  until  her 
$1000.00  would  buy  a  fifty  foot  lot  here.  She  then  set 
herself  to  the  task  of  educating  her  two  girls.  As  time 
went  on,  she  improved  these  properties  with  frame  build- 
ings commensurate  with  the  needs  of  that  time,  from  the 
savings  she  had  earned  from  the  sweat  of  her  brow. 
From  the  revenues  received  from  her  investments  she 
was  able  to  lay  aside  a  sufficient  amount  to  take  care  of 
a  later  building  program  which  called  for  the  erection  of 
brick  buildings  on  the  two  lots,  which  of  course  substan- 
tially increased  her  revenue. 


V  1, 


t 


Dallas    School  of   Commerce 


95 


Long  years  ago  she  and  her  two  daughters  moved  to 
New  York  City  and  have  been  living  comfortably  on  Fifth 
A-venue,  if  you  please,  on  the  revenues  received  from 
these  two  properties.  It  will  be  interesting  to  know  that 
the  Houston  property  is  located  in  the  block  with  the  Rice 
Hotel,  and  the  Dallas  property  is  on  Elm  Street  in  the 
rear  of  the  Praetorian  Building.  These  properties  are 
now  yielding  an  income  of  approximately  $60,000  per  an- 
num. 

In  Chicago  in  1908  a  99  year  lease  was  made  involving 
a  98  foot  frontage  at  336-348  South  State  Street  at  an 
annual  rental  of  $40,000.  In  1913,  five  years  later,  the 
same  property  was  subleased  for  the  entire  term  at  an 
annual  rental  of  $80,000,  showing  a  profit  of  $40,000  a 
year  for  95  years. 

In  New^  York  in  1900,  42x100  feet  at  the  comer  of 
5th  Avenue  and  57th  Street  sold  for  $175,000.00.  Last 
month  when  Sakes  &  Company  purchased  the  entire  block 
except  this  tract,  it  leased  for  66  years  at  an  annual  ren- 
tal of  $100,000.00  which  is  a  6%  return  on  a  million  six 
hundred  thousand  dollars,  or  an  increase  of  a  million  four 
hundred  thousand  dollars  in  20  years. 

In  order  to  get  the  maximum  value  of  your  property 
and  develop  it  to  its  highest  efficiency,  special  attention 
should  be  given  to  city  planning.  The  first  consideration 
should  be  wide  streets  permitting  the  natural  flow  of 
traffic  without  any  artificial  barriers, — I  mean  by  arti- 
ficial barriers,  railroad  tracks,  narrow  streets,  topography 
of  land,  etc., — all  of  these  are  artificial  barriers  to  prop- 
er city  development,  and  hence  have  a  decided  bearing  on 
the  value  of  property.  Just  what  I  mean  can  be  easily 
illustrated  by  reference  to  the  business  district  of  Dallas 
— the  Trinity  River  has  blocked  any  development  west, 
an3  land  just  across  the  river  is  worth  about  one-tenth 
of  what  it  is  on  the  east  side;  the  railroad  tracks  on  Pa- 
cific Avenue  and  Marilla  Street  constitute  artificial  bar- 
riers to  natural  progress  and  consequently  the  city  has 
been  forced  into  a  shoe  string  development  from  the  river 
on  the  w^est  to  the  H.  &  T.  C.  tracks  on  the  east.  When 
the  business  district  reached  the  tracks  in  east  Dallas, 
the  need  for  normal  expansion  was  quite  apparent,  which 
called  for  the  elimination  of  some  of  these  barriers  to 
progress,  which  resulted  in  the  removal  of  the  tracks  from 
Pacific  Avenue. 

Chicago's  business  district  is  confined  to  the  loop  be- 


96 


Modern  Real  Estate  Practice 


cause  of  the  overhead  transportation  lines  augmented  by 
the  further  fact  that  people  are  naturally  timid  about 
passing  under  overhead  tracks. 

New  York's  business  district  has  developed  10  miles 
out  Broadway  and  5th  Avenue  because  they  are  broad  and 
natural  arteries  of  traffic,  augmented  by  the  fact  that 
practically  all  of  the  side  streets  are  narrow.  23rd  and 
42nd  streets  are  the  exceptions,  and  both  of  these  are  de- 
veloped in  proportion  to  their  width  and  ability  to  carry 
the  traffic. 

With  the  introduction  of  the  automobile  came  the 
necessity  for  even  wider  streets  to  accommodate  the 
larger  volume  of  vehicular  traffic  and  in  some  of  the 
larger  cities  the  complete  rearrangement  of  the  transpor- 
tation lines  in  an  effort  in  so  far  as  possible  to  give  al- 
ternating streets  to  use  of  street  car  patrons,  and  likewise 
alternating  streets  for  the  automobile  traffic.  Owners 
of  business  property  should  be  careful  students  of  traffic 
conditions,  as  well  as  every  other  element  that  enters  in- 
to its  value,  for  the  very  sufficient  reason  that  an  over- 
crowded or  congested  condition  will  detract  from  the  value 
of  the  property.  I  have  seen  places  in  the  larger  cities 
where  the  sidewalks  were  so  crowded  that  only  those  on 
the  extreme  inside  could  get  a  glimpse  of  the  show  win- 
dows, and  even  their  attention  was  constantly  required  to 
avoid  collision  with  other  pedestrians. 

With  the  growth  of  our  larger  cities  and  the  constant 
change  in  business  methods  and  conditions  I  sometimes 
think  it  requires  a  great  deal  of  courage  on  the  part  of  the 
property  owner  to  spend  large  sums  in  the  erection  of  of- 
fice buildings,  hotels,  etc.,  which  are  so  soon  to  be  anti- 
quated by  others  with  improved  methods  and  conven- 
iences, and  in  this  connection  I  cannot  too  strongly  rec- 
ommend to  the  property  owners  the  advice  and  assistance 
of  a  competent  realtor,  on  the  erection  of  any  contem- 
plated improvement. 

The  comparatively  new  building  at  the  southwest  cor- 
ner of  Main  and  Akard  Streets  in  the  city  of  Dallas,  is 
an  outstanding  example  of  the  lack  of  proper  advice  by 
a  competent  realtor,  and  an  utter  failure  on  the  part  of 
the  owner  to  appreciate  the  conditions  governing  the  val- 
ue of  his  property.  Almost  before  the  building  was  com- 
pleted it  was  quite  apparent  that  it  was  in  no  wise  com- 
mensurate with  the  value  of  the  property,  and  a  detri- 


Dallas   School  of  Commerce 


97 


,9 


!l) 


} 


I    1  ■         % 


ment  not  only  to  his  own  property  but  the  entire  neigh- 
borhood as  well. 

This  new  improvement  on  one  of  the  best  comers  in 
Dallas,  stands  in  the  shadow  of  five  skyscrapers  and  yet 
the  revenue  from  the  upper  floors  hardly  pays  the  cost 
of  operation — the  investment  in  the  upper  floors  repre- 
senting an  economic  loss  of  probably  $50,000,  and  limits 
the  earning  power  of  this  splendid  comer  to  the  retums 
from  the  ground  floor. 

On  the  opposite  comer  the  Southwestem  Life  Build- 
ing is  a  maximum  or  100%  development,  while  the  Busch 
Building  across  the  street  is  architecturally  wrong,  which 
depreciates  from  its  rental  value — the  court  should  have 
been  on  the  south  side  instead  of  the  north.  A  southern 
exposure  to  all  of  the  ofifces  such  as  the  Magnolia  Build- 
ing will  have  would  make  the  Busch  Building  much  more 
desirable  for  a  climate  of  this  kind.  The  American  Ex- 
change made  the  mistake  of  building  a  60  foot  building 
on  a  100  foot  lot  ,thereby  losing  fully  25%  of  its  pro- 
ductive value.  The  original  Adouphus  is  beautiful  archi- 
tecturally, but  thousands  of  dollars  were  spent  in  erecting 
a  monument  to  Adolphus  Busch  with  the  result  that  the 
investment  is  top  heavy  and  will  not  yield  a  reasonable 
retum.  On  the  other  hand,  the  Adolphus  Annex  is  a 
100%  development.  The  Praetorian,  Westem  Indemnity, 
Southland  Life,  Texas  and  Pacific,  and  Dallas  County 
Bank  Buildings  are  100%  development.  The  Neiman- 
Marcus  building  is  an  economic  loss  to  the  holders  of  the 
lease,  as  the  property  will  stand  a  much  higher  develop- 
ment. This  applies  also  to  the  smaller  properties.  In 
this  day  of  advanced  business  methods  a  great  deal  of 
thought  is  necessary  in  the  erection  of  buildings  that  will 
probably  stand  for  generations.  Light,  air,  and  ventila- 
tion are  essentials,  floor  elevations,  height  of  ceilings, 
type  of  construction,  and  many  other  things  on  which 
you  need  advice.  Basements  are  of  no  value  in  this  cli- 
mate and  should  always  be  discouraged.  Any  builder 
should  take  into  consideration  the  property  on  both  sides 
and  develop  harmoniously  in  the  highest  degree  of  effi- 
ciency with  the  maximum  floor  area. 

The  leasing  of  stores  for  retail  purposes  has  recently 
become  one  of  the  most  scientific  studies  in  the  real  es- 
tate business. 

The  retail  marketing  of  merchandise  through  a  sys-* 
tem  of  chain  stores  in  all  of  the  important  cities  of  the 
United  States  by  the  original  manufacturer,  has  created 


98 


Modern  Real  Estate  Practice 


Dallas    School   of   Commerce 


99 


a  new  demand  for  choice  locations,  and  the  realtor,  in  or- 
der to  be  able  to  handle  this  class  of  business  success- 
fully, must  thoroughly  acquaint  himself  with  the  follow- 
ing facts  and  information, — the  general  boundaries  of  the 
retail  section  of  the  city;  the  streets  in  the  retail  section 
best  suited  for  the  location  of  retail  stores  handling 
men's,  women's,  and  children's  furnishings;  the  streets 
best  suited  for  the  location  of  stores  to  be  patronized  by 
the  wealthy,  medium  and  poor  classes  of  shoppers.  He 
must  also  know  the  quality  and  character  of  the  traffic 
and  its  purchasing  power. 

Of  equal  importance  with  the  leasing  of  stores  are  the 
buying,  selling  and  leasing  of  real  property  for  manufac- 
turing purposes.  Here  too,  expert  knowledge  of  the  fol- 
lowing facts  is  of  tremendous  importance, — type  and 
strength  of  structure, — general  plan  of  construction, — 
accessibility  to  transportation, — location  of  plant  in  re- 
gard to  its  proximity  to  a  desirable  and  ample  labor  mar- 
ket,— adaptability  for  special  lines  of  business. 

The  realtor  should  know  the  peculiar  advantages  of 
his  city  as  a  distributing  center,  also,  its  traffic  rates  and 
their  breaking  points, — the  availability  and  cost  of  coal 
and  other  fuels  and  raw  materials, — the  cost  of  labor  and 
his  city's  housing  facilities.  All  of  these  things  enter 
largely  into  the  value  of  business  or  industrial  property. 

It  is  interesting  to  note  the  sale  and  rental  value  of  25 
foot  units  in  the  highest  priced  retail  districts  of  other 
cities  and  I  have  therefore  compiled  this  data  on  about 
twenty-five  (25)  of  our  leading  cities  in  various  sections 
of  the  United  States. 


Town  Population     Size 

Kansas    City    324,000  25x100 

San  Antonio  161.000  25x100 

Springfield.    Mass 130.000  25x100 

Detroit    998.000  25x100 

Pittsburgh   588.000  25x100 

Atlanta   200.000  25x100 

Minneapolis  380,000  25x100 

Houston    „...  138,000  25x100 

New    Orleans   „ 387,000  25x100 

EI    Paso   ^ 78,000  25x100 

Lo«  Angeles  — 576,000  25x100 

St.    Louis    ._ 772.000  25x100 

Birmingham    — ♦.178.000  25x100 

Washington,    D.    C 438,000  25x100 

Fort  Worth  106.000  25x100 

Cleveland    „ 798.000  25x100 

Baltimore  733.826  25x100 

Chicago    2,701,705  25x100 

New    York    5,621,151  25x100 

Portland.    Ore 258,288  25x100 

Dallas   168,976  25x100 


Value 

Rate 

Rental 

front  Monthb  of  Re- 

Value 

Value 

foot     Rental 

turn 

$300,000 

$24,000 

$12,000 

$2,000 

8% 

87.500 

10,500 

3,500 

875 

10% 

187.500 

22.500 

7.500 

1.875 
Net 

10% 

750,000 

50,000 

30.000 

4,000 

6% 

500,000 

25.000 

20.000 

2,000 

5% 

250.000 

20.000 

10.000 

1.650 

8% 

200.000 

18.000 

8,000 

1,500 

97o 

150.000 

12,500 

6.000 

1,000 

8% 

250,000 

25,000 

10,000 

2,000 

10% 

87,500 

6,000 

3,500 

500 

7% 

450,000 

32,500 

18.000 

2,700 

7% 

500,000 

25,000 

20.000 

2.000 

5% 

175.000 

15,000 

7,000 

1.2?^0 

8% 

375.000 

37,500 

15.000 

3,100 

10% 

200,000 

10,500 

4,000 

f»75 

5% 

500,000 

25.000 

20.000 

2.0^0 

5% 

250.000 

25.000 

10.000 

2.000 

10% 

750,000 

60.000 

30.000 

5.000 

8% 

500.000 

35,000 

20.000 

3,000 

7% 

112,500 

15,000 

4.P00 

1.250 

10% 

150,000 

15.000 

6.000 

1,250 

10% 

i 


} 


> 


As  evidenced  by  the  foregoing,  sooner  or  later  the 
value  of  all  business  property  is  based  upon  the  rate  of 
return  on  the  investment.  In  the  fast  growing  cities  of 
the  southwest  the  unearned  increment  figures  largely  in 
the  value  of  property  in  the  path  of  the  city's  develop- 
ment. For  instance,  in  certain  well  defined  districts  of 
any  rapidly  growing  city,  realty  values  will  increase  easily 
10%  per  annum.  If  therefore  the  investment  is  paying 
4%  net  on  its  market  value,  and  is  increasing  in  value 
10%  per  annum,  you  can  readily  see  that  the  owner  is 
making  14%.  You  will  notice  from  the  data  I  have  com- 
piled that  the  rate  of  return  is  larger  on  the  investment 
in  cities  that  have  reached  the  maximum  growth,  or 
where  the  development  is  circumscribed,  which  shows  the 
absence  of  the  unearned  increment.  If  there  is  not  a  rea- 
sonable expectancy  of  increase  in  values  the  owner  is  en- 
titled to  a  larger  rate  of  return,— the  rate  being  based  on 
the  earning  power  of  the  dollar  at  the  time  the  lease  is 
made,  plus  its  reasonable  expectancy. 

City  planning  and  zoning  should  have  a  peculiar  sig- 
nificance and  should  be  of  especial  interest  to  the  realtor. 
Along  with  the  merchant  and  manufacturer,  broker  and 
banker,  it  will  no  doubt  interest  the  realtor  from  a  view- 
point of  civic  pride ;  but  aside  from  this  general  interest, 
it  should  appeal  to  his  business  judgment,  because  city 
planning,  and  zoning,  in  particular,  vitally  effect  the 
saleability  and  value  of  every  piece  of  property  in  the 
city. 

Looking  at  it,  therefore,  from  a  purely  business  stand- 
pomt,  what  is  more  important  to  the  permanent  success 
of  the  real  estate  business  in  any  city,  than  a  compre- 
hensive, intelligent  city  plan,  which  will  regulate  and 
guide  the  growth  of  that  city  along  the  lines  of  its  varied 
activities  ? 

Increase  in  population  and  its  corresponding  increase 
m  wealth,  will  largely  affect  real  estate  values,  but  there 
IS  nothing  that  will  aid  more  in  stabilizing  these  values 
when  created,  than  effective  zoning. 

The  progressive  Realtor  is  thoroughly  familiar  with 
every  phase  of  his  city's  activities,  as  they  relate  to  and 
concern  real  estate  and  its  value.  He  knows  what  sections 
are  and  should  be,  restricted  for  residential  purposes.  He 
knows  what  sections  possess  the  peculiar  advantages  nec- 
essary to  attract  the  manufacturer.  He  knows  the  prob- 
lems of  the  rental  section,  the  danger  of  congestion  and 


N 


smmmm 


100 


Modern  Real  Estate  Practice 


overcrowding,  the  trend  of  the  city's  growth  as  mani- 
fested by  ever  increasing  values  in  certain  downtown 
sections  and  diminishing  values  in  others. 

In  closing  I  want  to  call  your  attention  to  the  fact 
that  out  of  a  total  of  one  hundred  eighty  seven  billion 
dollars  invested  in  America,  one  hundred  ten  billions,  or 
60  %  of  the  total  wealth  is  invested  in  real  property  and 
is  the  foundation  of  all  the  large  fortunes. 

The  ideal  investment  is  that  form  of  security  which 
possesses  in  a  high  degree  the  following  characteristics — 
Safety,  Productivity,  Convertibility,  and  Speculative  Val- 
ue, without  sacrificing  one  for  the  other. 

Real  property  as  an  investment,  when  compared  with 
other  forms  of  securities,  combines  the  above  character- 
istics in  the  highest  degree. 

Real  property  as  an  investment  is  not  dependent  up- 
on the  moral  credit  of  a  nation,  and  is  therefore  not  af- 
fected by  warfare.  It  is  not  dependent  on  the  honesty 
or  competency  of  a  board  of  directors.  It  is  not  affected 
by  industrial  or  financial  panics.  It  cannot  be  stolen, 
nor  can  it  take  wings  by  night,  nor  can  it  be  taken  away 
without  the  due  process  of  law.  No  other  form  of  invest- 
ment possesses  the  characteristic  of  safety  in  so  high  a 
degree. 


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TRUSTEES  AND  PROPERTY  MANAGEMENT 


By  G.  N.  Aldredge. 

For  more  than  two  hundred  and  fifty  years  the  well 
defined  functions  of  banking  which  involved  deposits,  dis- 
count and  other  well  known  banking  features  constituted 
the  principal  activities  of  the  banking  fraternity.  Around 
these  fundamentals  have  grown  up  many  methods  and 
practices  which  have  been  incidental  to  the  main  purpose 
of  banking  and  have  been  merely  extensions  that  have 
been  forced  on  the  banks  by  the  growth  and  expansion 
of  industry.  The  business  methods  of  our  ancestors,  their 
means  of  transportation  and  the  implements  with  which 
they  sowed  and  reaped  were  changed  from  year  to  year. 
It  would  be  a  sad  commentary  upon  our  intelligence  if  we 
had  learned  nothing  from  example  in  the  banking  busi- 
ness in  these  two  and  a  half  centuries. 

The  financiers  of  the  old  school  were  accustomed  to 
deal  almost  exclusively  with  individuals  and  whenever 
the  necessity  was  forced  upon  them  of  choosing  an  agency 
combiningthequalitiesof  honesty  and  good  judgment  they 
naturally  selected  an  individual.  Modem  business,  how- 
ever, has  become  so  complex  in  its  various  features  that 
financiers  of  today  do  not  have  the  opportunity  to  become 
acquainted  with  the  individual  as  they  formerly  did  and 
from  this  situation  has  developed  what  we  in  modem 
times  call  a  Trust  Company.  For  two  hundred  and  fifty 
years  there  had  been  comparatively  no  changes  in  the 
essential  features  of  the  banking  business  until  the  Trust 
Department  was  organized.  In  recent  years  even  Nation- 
al Banks  have  acceded  to  this  growing  demand  and  are 
putting  in  Trust  Departments  with  their  regular  com- 
mercial banking  features.  All  this  preliminary  leads  us 
naturally  to  the  question  "What  is  a  Trust  Company?" 

Possibly  the  best  way  to  answer  this  question  is  to 
state  that  the  modem  Trust  Company  is  really  a  financial 
Department  Store ;  and  by  teUing  you  of  the  various  kinds 
and  characters  of  its  different  departments,  the  func- 
tions that  these  departments  perform,  and  the  purposes 
and  ideals  that  animate  the  officers  who  run  them,  I  can 
give  you  a  clearer  idea  of  what  a  trustee,  as  represented 
by  a  trust  company,  really  is.  From  that  I  shall  lead  to 
the  subject  under  discussion  which  is  Trustee  and  Prop- 
erty Management. 


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The  word  Trust  is  so  ambigious  that  when  we  begin 
to  chase  it  around  and  try  to  pin  it  down  to  find  out  just 
what  it  is,  it  is  almost  impossible  to  give  a  definition. 
Trusts  are  acquired  by  an  institution  in  a  great  many 
ways.  I  have  subdivided  the  methods  of  acquiring  it  and 
the  kinds  of  trusts  under  several  heads,  as  follows: 

L 

First,  what  is  known  as  Agency  Trusts.  This  is  the 
simplest  form  of  all  trusts.  It  is  merely  acting  as  agent 
for  the  individual  and  I  think  it  started  back  a  good  many 
years  ago  when  some  old  lady  left  her  pocket  book  on  the 
counter  with  the  request  that  we  take  care  of  it  until  she 
got  back. 

n. 

The  second  form  of  trust  is  what  is  known  as  "Trust 
by  Agreement,"  called  voluntary  trusts  which  includes 
escrow  accounts.  This  division  includes  any  character  of 
property  placed  with  an  institution  to  be  handled  for  a 
specif ic  purpose  designated  by  the  person  who  places  the 
trust  with  the  Company.  Escrow  accounts  of  course  are 
so  simple  that  I  do  not  need  to  dwell  on  this  point  as  they 
are  always  plaxied  with  a  joint  agreement,  the  conditions 
of  which  when  complied  with  release  the  trust  according 
to  the  original  terms. 

in. 

The  third  method  is  trust  created  by  will.  This  is 
probably  the  most  important  feature  of  the  activities  of  a 
trust  company  and  I  will  merely  outline  it  here,  as  a  more 
complete  discussion  of  it  will  be  taken  up  later.  Wills 
designate  trust  companies  to  act  for  them  under  the  head- 
ing of  executors  and  trusteeships. 

IV. 

The  fourth  is  Trust  by  Administration.  This  includes 
two  kinds,  known  as  Permanent  and  Temporary  Adminis- 
trations. Both  are  appointed  by  the  court  and  are  for  the 
handhng  of  property  placed  in  the  hands  of  the  Trust 
Company  by  the  court  order. 

V. 

The  fifth  is  Trust  by  Guardianship.  This  is  also  a 
trust  acquired  through  the  courts  and  involves  the  hand- 
ling of  property  belonging  to  minors,  lunatics,  habitual 
drunkards,  etc. 

Possibly  an  illustration  of  these  last  two  points  would 


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be  the  best  method  of  conveying  to  you  a  clear  idea  of 
just  what  these  two  characters  of  trusts  mean. 

Not  a  great  while  ago  there  were  two  old  ladies  who 
owned  a  piece  of  property.  One  of  these  had  the  misfor- 
tune to  lose  her  mind,  and  her  sister  was  appointed  guar- 
dian of  both  her  person  and  her  property.  In  a  shov 
time  the  second  sister  died.  On  solicitation  of  friends  of 
these  two  people,  the  Probate  Court  appointed  a  trust 
company  as  administrator  of  the  estate  of  the  second  sis- 
ter, and  as  guardian  of  the  estate  of  the  first  one. 

The  above  five  methods  of  acquiring  trusts  cover  the 
well  known  and  commonly  used  methods  of  placing  busi- 
ness in  the  hands  of  either  an  individual  or  a  Trust  Com- 
pany for  the  handling  of  property  for  the  benefit  of  some 
individual  or  institution  designated  by  the  parties  hand- 
ling the  trust.  So  far  I  have  merely  confined  the  outline 
to  an  academic  discussion  of  methods  of  acquiring  trusts 
and  now  I  want  to  bring  to  your  attention  the  fact  that 
after  the  trusts  are  placed  in  an  institution  they  are  dis- 
tributed out  to  the  different  departments  of  the  institu- 
tion by  the  character  of  the  business  of  the  trust.  The 
trust  company  for  this  purpose  has  organized  its  busi- 
ness into  about  four  departments. 

The  first  one  is  the  department  handling  what  is 
knov/n  as  coiporate  trust  matters.  This  includes  trus- 
teeship of  industrial  and  manufacturing  concerns.  This 
trusteeship  is  designated  usually  by  a  mortgage  under 
which  bonds  and  notes  may  be  issued  and  such  issue  us- 
ually being  certified  as  to  its  genuineness  by  the  trustee. 

In  the  second  department  is  handled  individual  trust 
matters.  Under  this  are  handled  estates  and  property 
which  come  to  the  trust  company  under  the  provisions  of 
wills,  voluntary  trusts,  etc. 

The  third  is  known  as  the  transfer  and  registration 
department.  Here  stocks  and  bonds  of  a  corporation  are 
transferred  on  the  books  of  the  Trust  Company  at  the  re- 
quest of  the  corporation ;  or  being  transferred  elsewhere 
are  registered  on  the  books  of  the  Trust  Company  as  a 
check  against  the  transfer  agent. 

The  fourth  department  is  called  the  Agency  Depart- 
ment. This  department  receives  securities  and  properties 
of  clients  which  it  handles  in  accordance  with  geneml, 
definite  or  specific  instructions  which  may  be  given.  The 
Charters  of  Trust  Companies  in  the  State  of  Texas  per- 


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mit  a  Trust  Company  to  do  anything  that  an  individual 
trustee  can  do.  It  can  receive  dividends,  can  clip  and  col- 
lect coupons  from  bonds  and  notes,  can  purchase  and  de- 
liver securities,  and  collect  and  release  notes  and  bonds. 
You  may  readily  see,  therefore,  the  very  nature  of  this 
business  involves  great  confidence  on  the  part  of  the  per- 
son who  places  his  securities  in  the  Trust  Company. 

As  an  example  of  what  I  mean  by  the  confidence  re- 
posed in  any  institution,  I  will  relate  an  experience  and  I 
trust  you  will  pardon  me  for  giving  examples  of  our  own 
business.  Not  a  great  while  ago  a  man  who  is  quite 
wealthy  decided  to  take  a  trip  extending  over  a  period  of 
at  least  six  to  eight  months  and  it  was  absolutely  neces- 
sary for  someone  to  be  appointed  to  represent  him  and 
his  business  while  he  was  away.  This  man  had  invest- 
ments of  various  natures  which  needed  attention  and  in 
order  that  things  might  be  properly  looked  after,  he  gave 
to  our  Trust  Company  complete  power  of  attorney  signed 
by  both  himself  and  his  wife  which  delegated  to  the  bank 
the  right  to  do  anything  with  that  man's  property  that  he 
could  have  done  had  he  been  present.  While  he  was  away, 
we  have  collected  rents ;  we  have  paid  taxes ;  we  have  col- 
lected notes,  placing  the  money  on  deposit  to  his  credit 
and  when  sufficient  money  has  been  accumulated  we  have 
invested  that  money  for  him,  usually  in  Vendor's  Lien 
paper;  releases  and  partial  releases  have  been  executed; 
we  have  made  extensions  of  notes;  clipped  coupons  and 
have  accepted  dividends  from  corporations  located  out  of 
the  State.  I  merely  recite  these  facts  of  the  handling  of 
this  estate  which  involved  many  thousands  of  dollars  to 
show  you  that  an  institution  that  handles  property  under 
the  plan  as  indicated  above  must  be  an  institution  of  un- 
questioned integrity  because  of  the  implicit  confidence 
in  the  institutions  by  the  clients  who  patronize  the  trust 
features  of  our  modem  institutions.  This  naturally  brings 
me  to  the  second  division  of  my  subject  which  is  Property 
Management. 

Under  two  heads  can  be  classified  the  restrictions  im- 
posed on  a  trust  company  in  the  handling  of  property. 
First  when  the  instrument  creating  the  trust  expressly 
authorizes  investments  in  certain  securities  or  directs  the 
handling  of  property,  there  is  no  responsibility  attached. 
As  an  example  of  this,  I  would  like  to  relate  concerning  a 
particular  trust  that  falls  within  this  category.  Some- 
time past  a  man  died,  and  willed  his  entire  property  to  a 


D ALIAS   School  of  Commerce 


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trust  company,  but  specifically  provided  that  in  ciise  any 
cash  was  left  on  hand  after  his  death  it  should  be  imme- 
diately invested  in  United  States  Government  bonds, 
to  be  held  until  such  time  as  the  provisions  of  his 
will  could  be  carried  out.  At  the  time  of  his  death  he  had 
accumulated  something  like  $60,000.00  or  $65,000.00.  The 
Trust  Company,  as  soon  as  it  qualified  as  executor  of  this 
man's  estate,  followed  the  provisions  of  his  will  and  in- 
vested the  money  in  United  States  Liberty  Bonds.  At 
the  time  of  the  investment  it  happened  that  the  bonds 
were  priced  considerably  higher  than  they  were  later. 
When  the  provisions  of  the  will  were  carried  out  and  the 
inheritance  tax  had  to  be  paid  it  was  found  necessary  to 
sell  part  of  these  bonds.  The  sale  was  made  at  a  loss  of 
several  Thousand  Dollars  but  inasmuch  as  the  will  speci- 
fically provided  the  conditions  relative  to  the  property 
left,  there  was  no  discretion  left  to  the  Trust  Company 
and  the  provisions  of  the  will  had  to  be  carried  out  im- 
plicitly and  for  that  reason  no  responsibility  for  this  loss 
could  possibly  be  attached  to  the  Trust  Company. 

This  naturally  brings  up  the  question  of  wills  but  in  a 
few  minutes  I  am  going  to  take  up  at  greater  length  this 
question  in  its  relation  to  property  and  property  manage- 
ment making  some  suggestions  whereby  errors  of  the 
character  indicated  in  this  little  story  can  be  omitted. 

The  second  group  of  restrictions  under  property  man- 
agement occur  when  the  instrument  creating  the  trust 
is  wholly  silent  and  the  handling  of  the  estate  is  left  en- 
tirely to  the  judgment  of  the  trustee  to  be  handled  ac- 
cording to  law. 

Property  management  naturally  falls  into  two  divi- 
sions. The  first  and  most  important  is  real  estate  and 
the  second  is  property  other  than  real  estate.  As  you  can 
see,  a  heading  such  as  this  one  covers  a  multitude  of  sins. 

I  am  first  going  to  discuss  for  a  minute  or  two  the 
securities  other  than  real  estate.  In  handling  property 
of  any  character  such  as  stocks,  bonds,  notes  or  Govern- 
ment Bonds,  it  is  quite  a  problem  to  have  a  sharp  line 
drawn  between  investments  and  speculations,  particularly 
where  the  question  is  left  entirely  to  the  institution  for 
determination  without  any  restrictions  being  placed  on  it 
by  the  grantor  of  the  trust.  In  order  that  this  may  be 
guarded  against  in  our  Trust  Department  we  have  a  meet- 
ing of  the  officers  of  the  institution  whenever  any  ques- 
tion is  to  be  passed  on  that  involves  an  expenditure  of 


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$5000.00  or  over.  At  this  meeting  the  interests  are  rep- 
resented by  the  following  departments: 

FIRST,  is  the  manager  of  the  City  Loan  Department. 
The  head  of  this  Department  has  devoted  his  entire  time 
to  handling  real  estate  and  a  major  portion  of  his  time 
for  years  has  been  in  making  loans  on  city  real  estate. 
SECOND,  is  a  man  who  is  head  of  our  Farm  Mortgage 
Department.  He  handles  farm  loans  all  over  the  south- 
west section  of  this  country  and  has  been  trained  in  this 
institution  for  fifteen  years.  The  THIRD  is  a  practical 
banker  who  has  charge  of  the  Commercial  Banking  De- 
partment of  the  Trust  Company.  The  FOURTH  is  the 
head  of  the  Trust  Department  and  his  time  is  devoted  ex- 
clusively to  Trusts  and  their  management;  and,  finally 
the  chairman  of  this  meeting  is  the  President  of  this  in- 
stitution who  exercises  supervision  over  all  the  depart- 
ments. In  this  way  every  question  submitted  is  thor- 
oughly investigated.  And  I  want  to  say  to  you  that  when 
any  proposition  is  passed  on  favorably  by  this  committee, 
you  can  rest  reasonably  assured  that  the  question  of 
speculation  in  any  character  of  security  will  be  practically 
eliminated. 

Now  getting  back  to  the  question  of  Real  Estate,  I 
think  you  young  gentlemen  have  been  saturated,  certainly 
surfeited  and  almost  nauseated  with  the  discussion  of  real 
estate  for  the  last  five  or  six  weeks  and  I  am  not  going 
to  burden  you  with  a  long  discussion  of  the  splendors  and 
the  many  attractions  of  real  estate  investments. 

I  want  to  give  you  a  few  new  thoughts  in  connection 
\vith  real  estate  and  the  trusteeship  of  either  real  estate 
or  the  securities  with  real  estate  as  the  foundation.  Some- 
one has  said  that  real  estate  is  the  basis  of  all  wealth. 
Certainly  in  our  work  we  recognize  the  unquestioned  mer- 
its of  securities  that  have  real  estate  as  the  foundation. 

The  handling  of  property  for  other  people  is  the  prin- 
cipal business  in  the  Trust  Department  of  our  institution. 
Back  in  the  early  history  of  our  company  the  first  char- 
acters of  trusts  consisted  almost  entirely  of  real  estate. 
As  our  instution  grew,  more  and  more  estates  were 
trusteed  to  us  and  before  long  we  found  a  Rental  Collec- 
tion Department  was  necessary.  Further  development 
made  necessary  the  next  naturaJ  step,  a  Sales  Agency  De- 
partment for  the  handling  of  property  of  clients  of  the 
institution  and  through  acting  as  trustee  for  the  prop- 
erties that  we  controlled.    Today  we  have  fully  half  of  the 


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institution  with  at  least  eight  or  nine  different  depart- 
ments that  do  all  of  their  business  based  entirely  on  se- 
curities with  real  estate  as  the  ground  work. 

In  handling  real  estate,  I  am  just  going  to  rapidly 
sketch  to  you  a  few  of  the  more  important  departments 
and  their  functions.  FIRST,  we  have  a  Rental  Depart- 
ment that  devotes  its  time  exclusively  to  securing  and  re- 
taining tenants  and  collecting  rents.  This  department 
has  nothing  to  do  with  prices  and  cannot  regulate  them. 
The  law  of  supply  and  demand  takes  care  of  this.  The 
SECOND  Department  is  for  collections.  We  have  a  City 
Collection  Department  and  an  Out  of  Town  Collection 
Department.  I  want  to  pause  just  long  enough  to  state 
that  we  have  come  to  the  conclusion  that  the  collectors 
constitute  one  of  the  live  departments  of  our  institution, 
and  are  almost  the  "Eyes  of  the  Office"  in  reference 
to  real  estate,  for  it  is  there  that  we  are  best  able  to  keep 
up  with  conditions  of  the  property  that  we  handle  and 
what  is  best  to  be  done  with  this  real  estate.  THIRD,  is 
the  Department  of  Expenditures  which  pertains  to  up- 
keep, repairs,  etc.,  of  the  real  estate.  FOURTH,  is  what 
we  call  our  Accounting  Department,  which  really  keeps 
the  books  for  the  other  departments.  The  rent  statement 
is  made  up,  itemized  as  to  details,  and  furnished  to  the 
Trust  Department,  and  through  the  Trust  Department 
furnished  to  the  beneficiaries  under  the  trusts  that  we 
may  handle. 

Alexander  Hamilton  Institute  of  New  York  City  prob- 
ably gives  us  the  best  definition  for  the  handling  of  real 
estate  in  its  final  analysis  when  it  says  "Management  of 
real  estate  is  really  housekeeping  on  a  large  scale  and  in- 
cludes not  only  the  deriving  of  income  but  also  the  keep- 
ing down  of  expenses." 

Before  closing  the  discussion  of  real  estate,  I  want  to 
call  attention  to  still  another  department  which  is  known 
as  the  Insurance  and  Tax  Department.  Here  we  keep  a 
record  of  the  insurance  on  all  of  the  properties  place: ' 
with  us,  renew  the  policies  from  time  to  time  and  pay 
City,  State  and  County  Taxes  at  the  regular  time.  We 
also  make  up  Federal  Income  Tax  Statements. 

Trusteeships. 

It  is  a  strange  fact  that  many  capable  persons  who 
devote  the  energies  of  a  successful  lifetime  to  acquiring 
property  often  give  little  thought  to  what  will  become  of 


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this  property  when  they  are  dead  or  otherwise  incapable 
of  administering  it.  This  is  a  viewpoint  expressed  by 
Mr.  Francis  H.  Sisson,  Vice-President  of  the  Guaranty 
Trust  Company  of  New  York.  The  question  of  trustee- 
ships usually  involves  more  or  less  the  question  of  wills. 
The  trusteeship  of  money  and  property  is  usually  ac- 
quired by  being  willed  to  an  institution.  This  naturally 
brings  us  to  the  question  of  the  importance  of  wills  and 
their  effect  on  the  property  left  by  any  person.  Modem 
statutes  relating  to  wills  are  based  largely  upon  the  old 
Roman  Laws.  Under  these  laws  freedom  to  make  a  will 
was  first  unrestricted  but  later  the  right  to  dispose  of 
property  was  curtailed.  The  restrictions  to  the  free- 
dom of  disposing  of  property  of  any  character  by  wills 
has  been  changed  from  time  to  time  to  meet  modem  con- 
ditions and  these  restrictions  exist  in  practically  every 
country.  With  us  today  hmitations  in  many  respects  are 
imposed  by  the  laws  of  various  states  of  the  union. 

When  a  man  settles  down  to  draw  his  will,  two  influ- 
ences usually  govern  him.  These  two  influences  are  almost 
at  extremes.  FIRST,  utter  disregard  and  little  thought 
to  the  ultimate  outcome  of  his  efforts ;  and,  SECOND,  the 
thought  that  animates  the  maker  of  the  will  in  an  effort 
on  his  part  to  maintain  his  authority  over  property  for 
as  long  a  period  as  the  law  will  allow.  This  is  what  we 
call  a  hide-bound  or  tight  will  and  the  purposes  influenc- 
ing this  are  usually  conceit,  vanity  or  desire  for  fame. 
These  are  some  of  the  controlling  motives  that  affect 
property  placed  with  a  trustee. 

The  next  step  in  the  question  of  wills  as  it  affects 
property  after  a  man  is  convinced  of  the  necessity  of 
drawing  a  will  is  the  importance  of  having  that  will 
drawn.  When  a  man  dies  and  appoints  one  or  more  indi- 
viduals as  executors  of  his  estate,  especially  when  bene- 
ficiaries are  involved,  they  frequently  handle  the  prop- 
erty in  such  a  way  as  to  defeat  the  aims  of  the  testator. 
Right  here  come  in  two  of  the  most  useful  functions  of 
the  Trust  Company  acting  as  Trustee  in  the  management 
of  property  for  the  maker  of  a  will  and  that  is;  FIRST, 
the  willingness  of  a  Trust  Company  to  serve;  and, 
SECOND,  the  undoubted  ability  of  the  Company  to  han- 
dle affairs  of  any  nature.  A  Trust  Company  has  its  best 
interests  to  sen^e  by  canying  out  absolutely  the  intents 
and  purposes  of  a  person  who  desires  to  appoint  the  Com- 
pany to  represent  him  in  any  capacity. 


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> 


I  will  pause  here  long  enough  to  give  an  illustration 
concerning  an  estate  in  another  city  that  was  explained 
to  me  by  the  Trust  Officer  of  a  big  institution.  About  a 
year  and  a  half  ago  a  man  died  who  left  ap- 
proximately Two  and  a  Half  or  Three  Million 
Dollars  consisting  of  property  of  almost  every  conceivable 
character,  from  western  cattle  land  to  German  marks. 
He  appointed  several  of  his  relatives  to  serve  as  executors 
and  trustee  of  his  estate,  a  part  of  whom  were  bene- 
ficiaries under  the  will  and  part  were  not.  All  of  his  prop- 
erty was  community  property  and  the  effort  on  his  part 
was  to  trustee  his  entire  estate  through  the  life  of  the 
beneficiaries.  Now  I  want  to  draw  two  distinctions  be- 
tween what  would  have  happened  if  he  had  appointed  a 
Trust  Company  and  what  did  happen  when  he  appointed 
individuals.  A  Trust  Company  would  have  done  its  very 
best  to  carry  out  the  purposes  of  the  man  who  drew  the 
w^ill.  The  benef  icaries  under  this  will  actually  divided  this 
estate  giving  to  those  interested  one-half  of  the  estate 
which  was  theirs  under  the  Community  Laws.  The  joker 
in  the  deal  was  that  in  the  dividing  of  the  estate  every 
particle  of  revenue  bearing  property  was  set  aside  to  the 
beneficiaries,  and  the  non-revenue  bearing,  ("The  chips 
and  the  whet-stones")  was  reserved  in  that  half  of  the 
estate  that  was  trusted  for  so  many  years. 

The  individual  as  a  trustee  in  about  four  cases  out  of 
five  is  a  complete  failure  for  a  number  of  reasons.  An 
individual  may  die,  a  Trust  Company  does  not;  an  indi- 
vidual gets  sick  and  neglects  his  business,  a  Trust  Com- 
pany does  not ;  an  individual  may  not  have  the  ability,  a 
Trust  Company  strives  to  have  efficient  individuals  at  the 
head  of  its  different  Departments.  A  Trust  Company 
has  corporate  responsibiUty  as  opposed  to  individual  in- 
tegrity. It  has  vaults  for  safekeeping  as  against  pos- 
sibly a  desk  that  is  not  even  fire  proof. 

I  merely  bring  to  your  attention  some  of  the  thoughts 
that  must  come  to  everyone  of  us  who  ever  accumulates 
any  property,  because  the  history  of  property  the  world 
over  is  that  the  average  time  in  the  transference  of  prop- 
erty is  once  in  every  twenty-five  years.  Now  get  that 
thought  clearly — ^that  regardless  of  how  long  you  as  an 
individual  may  live  and  handle  your  property,  the  aver- 
age over  the  world  is  that  all  property  is  transferred  at  an 
average  of  once  in  every  twenty-five  years.  So  you  can 
readily  see  just  how  important  this  question  is. 


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In  the  old  days  when  a  man  was  ready  to  ask  some- 
body to  act  in  the  capacity  of  trustee  he  naturally  se- 
lected a  friend  or  some  individual  whom  he  thought 
especially  qualified.  The  manufacturer  or  the  big  mer- 
chant naturally  asked  his  banker.  All  of  them  picked 
out  someone  with  whom  they  were  personally  acquainted. 
Now  let  me  present  an  idea  or  two  for  your  consideration 
along  this  line.  No  one  would  pick  an  inefficient  indi- 
vidual to  sei-ve  as  a  trustee  or  executor.  That  would  be 
utter  folly  and  on  the  other  hand  the  more  efficient  the 
individual  we  select  to  handle  our  affairs,  the  more  that 
man  is  of  necessity  tied  up  with  his  own  affairs,  and 
therefore  has  no  time  to  devote  to  outside  business. 

Turning  back  to  the  question  of  wills  as  it  affects 
property,  I  want  to  give  you  another  illustration  of  what 
is  known  as  the  lack  of  liberty  in  handling  property.  Many 
years  ago  in  the  City  of  New  York  a  very  fine  financier 
willed  the  bulk  of  his  estate  to  an  institution  in  trust  for 
his  children.    Not  a  great  many  years  before  he  died  he 
had  invested  very  heavily  in  a  certain  class  of  security 
which  at  that  time  was  considered  the  epitome  of  safety 
and  success.    The  old  ferries  were  plying  between  New 
York  and  Jersey,  and  between  New  York  and  Brooklyn, 
and  were  among  the  best  paying  investments  in  the  city. 
This  man  bought  the  bonds  of  the  Ferry  Company  and 
trusteed  these  bonds,  specifically  providing  that  the  in- 
come should  be  paid  regularly  to  his  heirs  and  under  no 
conditions  were  the  bonds  to  be  sold.    If  he  had  allowed 
the  Trust  Company  a  little  latitude  in  his  will  the  chang- 
ing conditions  would  have  been  offset  by  the  intelligence 
of  the  Trust  Officers  of  that  institution  when  they  fore- 
saw the  trouble  coming.     This  man  never  dreamed  but 
what  ferry  bonds  would  be  good  for  all  times.  He  did  not 
even  conceive  of  a  subway  along  the  Hudson  River  and  a 
bridge  across  East  River.    Twenty-five  years  after  this 
man  died  the  Ferry  Company  fell  into  the  hands  of  a  re- 
ceiver, the  bonds  became  absolutely  worthless,  and  his 
estate  lost  to  the  extent  of  several  million  of  dollars, — but 
the  hands  of  the  trustee  were  tied   so  they   absolutely 
could  not  turn.    These  things  that  I  am  telling  you  are  il- 
lustrations from  cases  that  have  actually  happened  and 
are  given  to  you  merely  to  illustrate  the  warnings  that 
are  thrown  out  from  time  to  time  against  the  making  of 
wills  by  individuals  without  proper  consultation  with  a 
lawyer,  bank  or  trust  company  qualified  to  advise  them. 

I  will  tell  you  of  one  more  case  before  I  change  the 


0  s 


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subject.  About  150  miles  south  of  this  city  is  a  plantar 
tion  of  approximately  3000  acres  of  as  fine  land  as  is  to 
be  found  anywhere.  On  this  plantation  there  is  a  big 
old-fashioned  home  and  in  this  sits  a  middle  aged  man 
without  any  of  the  comforts  of  life,  and  almost  without 
the  necessities, — tied  up  by  the  restrictions  of  one  of  those 
hide-bound  wills.  Many  years  ago  this  man's  father  willed 
him  that  entire  farm  in  trust,  the  farm  never  to  be  sold 
or  mortgaged  during  the  lifetime  of  his  boy.  The  boy  is 
now  a  man  and  through  a  series  of  unfortunate  crop  years 
and  overflow,  the  management  of  this  property  has  ac- 
tually been  handled  at  a  loss  so  that  there  not  only  has 
been  no  income  but  the  man  could  not  get  the  money  to 
farm  it  with  this  past  year  or  two  because  in  the  restric- 
tions on  the  land  no  mortgage  could  be  placed  on  it  and 
he  cannot  borrow  a  dollar  to  farm  it  with.  The  result  is 
that  this  3000  acre  farm  has  not  had  a  plow  stuck  in  the 
ground  for  the  last  two  yeai-s  and  this  poor  man  cannot 
raise  any  money  whatever  to  farm  this  magnificent  piece 
of  land. 

One  other  illustration  and  then  I  will  change  the  sub- 
ject. For  several  years  we  have  been  handHng  an  estate 
that  had  some  bank  stock  in  a  little  town  about  one  hun- 
dred miles  from  Dallas.  Restrictions  placed  on  the  estate 
were  such  that  we  could  not  dispose  of  the  stock.  For 
three  years  past,  because  of  repeated  crop  failures,  the 
conditions  of  the  community  surrounding  this  little  bank 
were  so  bad  we  foresaw  trouble  coming  for  this  bank. 
Six  months  ago  the  bank  failed  and  the  estate  not  only 
lost  this  stock  but  had  to  put  up  dollar  for  dollar  an  as- 
sessment equal  to  the  par  value  of  its  holding.  If  it  had 
not  been  for  the  restrictions  the  stock  could  have  been 
sold  at  least  a  year  to  eighteen  months  ago,  and  this  loss 
could  have  been  avoided. 

I  could  go  on  at  considerable  length  in  this  same  line 
of  thought,  but  I  merely  bring  to  your  attention  several 
illustrations  to  bring  forcibly  to  your  mind  the  necessity 
for  very  careful  consideration  in  drawing  a  will  that  in- 
volves the  handling  of  any  character  of  property  and  try- 
ing to  use  the  judgment  that  you  have  today  which  may 
be  absolutely  good  now  but  which  may  not  be  worth  ten 
cents  on  the  dollar  in  twelve  months  from  the  time  the  will 
is  written. 

In  conclusion,  I  want  you  to  know  that  it  is  a  matter 


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of  history  that  a  lawyer  was  instrumental  m  drawing  up 
the  charter  of  the  first  Trust  Company  dealing  with 
Wills,  Trusteeships,  Estates  and  Property  Management. 
The  lawyer  better  than  anybody  else  saw  the  difficulties 
concerning  the  holding  of  property  in  trust  for  someone 
else  and  a  lawyer  was  the  first  one  to  suggest  the  idea 
that  later  grew  into  a  Trust  Company.  He  discussed  his 
proposition  with  his  banker  and  made  the  suggestion  that 
he  wished  the  bank  could  handle  the  property  just  to  suit 
itself  for  the  benefit  of  the  estate  and  from  this  idea  the 
first  trust  company  was  organized. 

By  having  the  ability  and  the  willingness  to  serve  as 
Administrator,  Executor  or  Trustee  in  a  manner  more 
efficient  than  any  individual,  a  Trust  Company  serves  a 
community  in  an  entirely  different  manner  from  an  ordi- 
nary bank.  The  Trust  Company  recognizes  the  obliga- 
tions and  responsibiUties  imposed  on  it  by  the  very  na- 
ture of  its  business.  It  is  a  very  solemn  occasion  when 
one  is  asked  to  advise  a  man  who  desires  to  safeguard  his 
heritage  for  the  benefit  of  his  loved  ones.  For  this  rea- 
son and  because  of  the  consciousness  of  its  responsibility 
in  the  handling  of  estates,  the  Trust  Company  wiU  in  a 
few  years  almost  entirely  take  the  place  of  the  individual 
trustee. 


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TAXATION 


By  L.  L.  Bristol. 

"The  act  of  laying  a  tax  or  of  imposing  taxes  on  the 
subjects  or  citizens  of  a  State  or  Government,  or  on  the 
members  of  a  Corporation  or  Company,  by  the  proper 
authority,  the  raising  of  revenue  required  for  Pubhc  Ser- 
vice by  means  of  taxes,  the  system  by  which  such  a  reve- 
nue is  raised." — Century  Dictionary. 

"A  'tax'  is  a  rate  or  sum  of  money  assessed  on  the 
person  or  property  of  a  citizen  for  the  use  of  the  Nation 
or  State."— Webster  Dictionary. 

"Taxes  are  defined  as  the  enforced  proportional  con- 
tribution of  persons  and  property  levied  by  the  authority 
of  the  State  for  the  support  of  the  Government  and  for 
all  public  needs."— Cooley  on  Taxation,  Page  1. 

Taxation  of  various  forms  commenced  at  such  an  ear- 
ly period  in  the  world's  history  and  the  methods  of  as- 
sessing and  collecting  taxes  are  so  varied,  that  many  vol- 
umes have  been  written  by  some  of  the  world's  best 
economists  on  the  subject;  to  attempt  to  even  briefly  out- 
line Taxation  History  would  mean  a  paper  of  such  length 
that  it  could  not  be  delivered  in  the  time  allowed.  I  have 
therefore  attempted  to  discuss  the  question  only  as  it 
effects  real  property,  as  of  this  date,  1921,  in  the  State 
of  Texas. 

Taxpayers  often  ask  the  question :  "Where  does  my 
tax  money  go?"  For  your  information  locally,  I  will  say 
that  the  1921  city  tax  rate  is  $2.44  per  $100.00  valuation, 
which  is  distributed  as  follows : 

Tax  Levy  for  1921-22 

General  Fund 896 

General  School  Fund 75 

St  Imp.  Fund 25 

Park  Fund  10 

Public  Library  Fund 015 

Street  Lighting  "___ 

$2,076 


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Interest  and  Sinking  Funds 

RefiTulsiiT      - - *"     •■!•  i^ 

School  Bonds  prior  to  April  1,  1919 078 

School  Bonds  prior  to  July  1, 1919 025 

School  Bonds  prior  to  May  1, 1920 075 

Hospital  Bonds  00b 

Abbatoir  Bonds  -•     -00^ 

Total  Int.  and  Sinking 364       >364 

Total  Tax  Levy  ?2.44 

on  each  $100.00  valuation. 

The  State  and  County  rate  is  $1,491/2  per  $100.00,  as- 
sessed value: 

State  Tax ^2 

County  Tax -    -^^^ 

$1,495 

It  will  be  seen  from  the  illustration  that  after  all, 
irrowing  cities  can  spend  only  a  certain  amount  of  money 
where  the  results  are  visible,  and  as  the  bonded  debts  m- 
crease  it  decreases  the  amount  available  for  other  uses. 

It  is  therefore  encumbent  upon  taxpayers  to  seriously 
consider  bond  issues  before  voting  additional  burdens ;  it 
is  all  right  to  say— "let  posterity  pay  part  of  debt  -- 
but  there  is  such  a  thing  as  loading  posterity  to  the  point 
that  its  credit  can  not  be  further  increased  and  then 
stagnation  results. 

During  the  recent  city  election,  when  an  additional 
bond  issue  was  voted,  certain  advocates  of  the  issue  stated 
that  taxes  would  not  be  raised  on  account  of  the  issue  be- 
ing voted.  Such  a  statement  was  fundamentally  wrong, 
because  a  41/2%— ^0  year  bond  issue  for  one  million  dol- 
lars requires  $70,000.00  per  year  to  retire  the  debt,  and 
while  the  tax  rate  may  not  have  been  raised,  the  $70,- 
000  00  has  to  be  taken  from  other  sources,  which,  if  said 
issue  had  not  been  voted,  would  have  permitted  a  reduc- 
tion in  the  tax  rate  in  ratio  to  the  $70,000.00  required  to 
meet  the  bonded  debt. 

As  cities  grow  and  need  more  schools,  better  streets, 
parks,  larger  and  better  water  supplies,  bond  issues  are 
mevitable  and  must  be  voted,  but  when  visionary  dream- 
ers talk  of  Ten  Million  Dollar  Bond  Issues,  before  you 
vote  get  out  your  lead  pencil  and  figure  out  what  your 


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tax  receipt  is  going  to  look  like  in  dollars  and  cents  two 
years  after  the  money  is  spent. 

To  prove  the  above  statement,  get  out  a  tax  receipt 
for  Lot  1,  Block  B  of  1910  and  compare  it  with  your  1921 
receipt.  At  the  same  time  compare  the  County  and  City 
bonded  indebtedness  for  the  corresponding  dates. 

John  Smith  must  adjust  his  expenditures  to  this  in- 
come or  else  come  to  grief;  he  must  live  within  his  means, 
if  his  income  decreases,  he  must  lower  his  scale  of  hving. 
As  compared  with  the  individual,  the  State,  County  and 
City,  or  other  taxing  districts,  reverses  the  process  of  the 
individual,  and  first  considers  expenditures,  and  then  in- 
come. The  result  naturally  tends  to  increase  taxes,  either 
by  raising  the  tax  rate  or  increasing  the  assessed  value. 

High  taxes  mean  high  rent,  as  the  burden  is  and 
should  be  passed  to  the  tenant  for  there  is  no  reason 
why  the  net  returns  on  real  estate  investments  should  not 
yield  the  same  return  as  money  loaned  on  a  mortgage  on 
the  same  piece  of  real  estate. 

You  often  hear  it  said  that  the  little  home  owner  pays 
more  than  his  share  and  is  not  taxed  in  proportion  to  the 
larger  taxpayer.  Cold  facts  do  not  justify  this  statement 
so  far  as  the  City  of  Dallas  is  concerned.  There  are  ap- 
proximately 30,000  taxpayers  on  the  City  Tax  Rolls, 
about  300  of  which  pay  over  50%  of  the  entire  tax  of  the 
city.  The  entire  amount  of  taxes  collected  from  home 
owners  alone  would  not  be  sufficient  to  pay  the  running 
expenses  of  our  public  schools. 

A  Tax  Collector  often  hears  a  taxpayer  on  a  home 
complain  of  his  assessment,  when  said  taxpayer  may  have 
three  or  four  children  enjoying  the  benefits  of  a  nine 
months  school  system  in  fireproof,  modem,  sanitary 
school  buildings,  who  are  enjoying  said  privileges  by  rea- 
son of  large  taxes  paid  by  railroads  and  other  franchise 
holding  public  utilities,  banks,  mail  order  houses  and  cor- 
porations, who  supply  the  deficit  between  the  amount 
paid  by  the  small  tax  payer  and  the  amount  necessary  to 
maintain  schools,  police  and  fire  departments,  hospitals 
and  other  public  necessities. 

Real  estate  owners  should  always  render  their  prop- 
erty at  the  office  of  city  and  state  and  county  assessors. 
Care  should  be  taken  in  rendering  to  see  that  your  de- 
scription corresponds  with  your  deed.  Also  see  that  your 
State-County  assessment    and  City    assessment    corre- 


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^Tionds  This  does  not  mean  that  the  assessed  valuation 
should  be  the  same  as  in  many  instances  different  rat^^^^ 
are  used  by  different  assessors.  I  am  mf ormed  that  Dal- 
^s  county  renders  on  a  60%  basis  while  the  city  uses  a 
50%  basis.  In  paying  taxes  verify  your  receipts  with 
your  rendition.  If  you  have  sold  any  Property  which  is 
rendered  in  your  name,  and  which  was  prorated  at  time 
of  sale  you  should  notify  the  Tax  Collector  of  said 
ch^ge,  and  as  a  matter  of  courtesy  notify  party  to  whom 
you  sold,  as  he  may  overlook  paying  same  on  account  ot 
the  property  not  being  rendered  in  his  name,  conse- 
quently failing  to  receive  notice. 

The  property  owner  who  is  careless  and  fails  to  ren- 
der his  property,  allowing  same  to  go  on  the  un-rendered 
or  unknown  Hst,  is  usually  careless  about  paying  and  is 
always  a  kicker  when  forced  to  pay. 

Over  90%  of  Dallas  citizens  pay  taxes  before  delin- 
Quent,  which  speaks  well  for  Dallas.  . 

It  is  to  be  hoped  that  some  day  the  taxpaying  public 
^dU  awaken  to  the  weakness  of  locally  elected  tav  asses- 
sors. It  is  simply  human  for  a  man  to  desire  to  please 
those  who  have  elected  him,  and  on  >yhom  his  continuance 
in  office  depends,  and  the  desire  to  please  may  often  work 
counter  to  that  strict  justice  with  which  assessments 
should  be  made.  The  value  of  experience  is  not  greater 
in  any  occupation  than  that  of  the  assessor.  The  office 
of  Assessor  and  Collector  should  be  one  and  not  separat - 
as  exists  today  throughout  the  State,  (with  a  few  ex- 
ceptions) for  the  reason  that  the  tax  rolls  are  prepared 
bv  the  Tax  Assessor  and  no  matter  how  efficient  a  iax 
Collector  may  be,  he  can  not  render  the  proper  public 
service  if  the  tax  rolls  have  been  prepared  by  an  incom- 
petent assessor. 

Why  the  necessity  of  a  County  Tax  Collector— a  Coun- 
ty Tax  Assessor  and  a  City  Assessor  and  Collector,  when 
it  could  easily  be  handled  by  one  office,  representing  both 
the  City  and  County  and  State?  However,  to  accomplish 
this  requires  an  Amendment  to  our  State  Constitution. 
Let  us  hope  it  may  come  to  pass. 

Boards  of  Equalization— Or  Board  of  Appeals 
The  Commissioners'  Court  sits  as  a  Board  of  Equaliza- 
tion on  the  second  Monday  in  June  each  year  for  the  in- 
spection, correction,  equaUzation  and  approval  of  assess- 
ments    If  a  taxpayer's  assessment  is  raised,  he  must  be 


#• 

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notified ;  he  must  then  appear  and  show  cause  if  he  feels 
his  assessment  should  not  be  raised. 

Cities  also  have  similar  boards,  sometimes  elected 
and  sometimes  appointed.  Real  Estate  Boards  should  be- 
come actively  interested  in  seeing  that  competent  real- 
tors are  placed  on  these  boards,  for  it  is  of  vital  impor- 
tance that  taxes  be  equal  and  uniform,  and  surely  no  one 
is  better  qualified  to  pass  on  land  values  than  a  realtor. 
It  may  be  of  interest  to  state  that  when  the  City  of  Dal- 
las raised  the  land  values  in  1916,  three  real  estate  men — 
E.  T.  Laughborough,  L.  H.  Hughes  and  W.  W.  Fisher- 
were  selected  to  appraise  our  land  values. 

Interstate  Commerce  Commission  valuation  engineers, 
and  railroad  valuation  engineers,  who  have  worked  valua- 
tions all  over  the  United  States,  state  that  Dallas  city  val- 
ues are  nearer  correct  and  better  equalized  than  any  other 
city  they  have  worked  in. 

Subsequent  record  was  kept  of  300  land  sales,  and 
their  appraisal  was  92%  of  sale  price,  which  is  remark- 
ably accurate,  considering  the  wide  range  of  property 
valued,  and  that  the  benefit  of  doubt  should  be  given  the 
tax  payer. 

Poll  Tax 

Over  half  of  our  states  collect  a  poll  tax.  Some  of 
them — as  in  Texas — require  the  payment  of  same  as  a 
qualification  to  vote.  In  Texas  cities  of  over  10,000  the 
tax  must  be  paid  in  person  before  January  31st  (which  is 
delinquent  date)  in  order  to  qualify  as  a  voter.  Poll  tax 
in  Texas  is  $1.75,  of  which  $1.00  goes  to  the  School  Fund, 
50c  to  General  Revenue  and  25c  to  County.  Cities  may 
also  levy  a  poll  tax  not  to  exceed  one  dollar  ($1.00).  The 
poll  tax  has  existed  for  many  centuries.  As  far  back  as 
the  year  1377  England  collected  a  poll  tax  of  four  pence 
on  all  persons,  male  and  female,  over  14  years  of  age. 

Taxes  are  payable  in  coin  or  currency,  and  a  Tax  Col- 
lector may  refuse  to  accept  checks  or  drafts.  However, 
he  may  accept  county  scrip  in  payment  of  county  taxes. 
What  a  Tax  Collector  receives  he  must  at  his  peril  safely 
keep  and  account  for.  He  has  no  defense  when  moneys 
have  been  stolen  or  lost  through  no  fault  or  negligence 
on  his  part.  This  seems  a  very  harsh  rule,  but  it  is,  with- 
out a  question,  a  very  necessary  one. 

"Taxation  shall  be  equal  and  uniform,"  says  the  Texas 
Constitution.    The  greatest  weakness  in  county  rendi- 


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tions  is  that  land  and  improvements  are  not  separated; 
in  many  instances  valuable  improvements  can  escape  taxa- 
tion. This  evil  should  be  corrected,  and  can  easily  be 
done  by  having  all  improvements  inspected  and  appraised 
by  competent  architects  or  contractors.  The  Tax  As- 
sessor can  not  perform  this  work  as  he  may  not  know 
improvement  values,  and  besides  routine  detail  work  ot  a 
Tax  Department  should  consume  his  entire  time.  Tax 
officials,  as  a  general  rule,  have  neither  the  equipment  nor 
competent  help  to  render  proper  service,  and  about  the 
time  he  has  learned  how  to  conduct  his  department  etti- 
ciently,  some  new  man  is  appointed  or  elected. 

It  is  my  personal  opinion  that  as  long  as  Tax  Assessor 
and  Collectors  are  elected  by  popular  vote  and  only  hold 
office  from  two  to  four  years,  taxation  will  be  unequal 
and  uniformity  a  misnomer.  Fully  realizing  his  short 
tenure  of  office,  he  pursues  the  course  of  least  resistance 
established  by  precedent  and  prefers  to  let  the  tax  rate 
continually  climb  rather  than  revise  and  equalize  land 
and  improvement  values. 

To  illustrate— suppose  building  improvement  values 
were  increased  only  50%  as  much  as  their  cost  has  in- 
creased in  the  last  four  years,  the  result  would  be  a  large 
increase  on  the  tax  rolls,  which  would  make  a  tax  rate 
increase  unnecessary. 

Land  values  in  growing  cities  should  be  revised  at 
least  every  five  years.  Some  sections  remain  about  sta- 
tionary in  value,  while  others  by  reason  of  paved  streets, 
modem  construction  of  improvements,  etc.,  enhance  in 
value  rapidly.  This  condition  brings  about  an  unequal 
tax  burden,  which  is  manifestly  unjust  and  unfair. 

The  removal  of  railroad  tracks  on  Pacific  Ave.,  the 
widening  of  Hasten  and  Harwood  streets,  have  unques- 
tionably enhanced  the  value  of  property  on  these  streets 
and  in  fairness  to  other  taxpayers  the  tax  rolls  should 
reflect  the  enhancement. 

Delinquent  Taxes 

A  delinquent  taxpayer  is  a  burden  to  the  prompt  tax- 
payer, he  enjoys  all  public  benefits  and  rides  on  a  pass; 
his  pass  should  be  taken  away  from  him  and  jt  can  be 
done  if  officials  would  follow  the  law  provided  for  the 
collection  of  delinquent  taxes.  One  provision  of  law  is 
advertising  delinquents;  however  it  is  seldom  done,  and 
when  done  is  usually  published  in  some  small  paper  of  hm- 


m 


t 


ited  circulation,  that  secures  the  contract  by  reason  of  a 
low  bid  per  line,  and  the  results  of  collection  are  usually 
on  a  par  with  the  circulation  of  the  publication.  If  delm- 
Quent  taxpayers  of  the  City  of  Dallas  knew  that  all  de- 
linquents would  be  published  in  papers  with  a  large  cir- 
culation like  the  News,  Times  Herald,  Journal  and  Dis- 
patch, there  would  be  practically  no  delinquents,  as  the 
average  person  does  not  want  any  pubhcity  m  regard  to 
his  unpaid  obligations  to  the  community. 

Concloision 

In  the  concluding  lines  on  the  law  of  taxation  by 
Cooley,  he  says:  "The  chief  protection  of  the  citizen 
must  at  last  be  sought  in  the  intelligence  and  integrity  of 
public  officers,  and  where  these  fail,  as  too  often  they  do, 
the  injury  must  frequently  prove  irreparable." 


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THE  REALTOR,  HIS  WORK,  OPPORTUNITIES  AND 

RESPONSIBILITIES 


i       I 


f 


By  J.  B.  Rucker. 

I  have  been  assigned  as  a  subject  for  discussion:  "The 
Realtor,  His  Work,  Opportunities  and  Responsibilities, 
Ethics  governing  his  relations  with  other  Realtors  and 
his  Clients."  I  shall  treat  these  different  phases  in  the 
order  named  that  those  of  you  who  are  inexperienced  in 
business  life  may  in  a  measure  realize  the  importance  of 
this  profession.  I  shall  go  into  considerable  detail  as  to 
the  scope  of  his  activities. 

The  word  Realtor  is  doubtless  derived  from  a  combi- 
nation of  the  three  words  "real  estate  broker"  and  is  de- 
fined by  the  latest  editions  of  Webster's  Unabridged  Dic- 
tionary :  "A  Realtor  is  a  real  estate  broker  who  is  a  mem- 
ber of  a  local  board  having  membership  in  the  National 
Association  of  Real  Estate  Boards,  an  organization  in- 
corporated for  the  purpose  of  advancing  the  interests  of 
real  estate  brokers  and  the  protection  of  the  public  from 
unprincipled  agents  and  brokers." 

It  is  used  in  a  proper  sense  only  by  those  who  are 
members  of  local  Real  Estate  Boards  as  well  as  of  the  Na- 
tional Association.  The  word  was  coined  for  the  purpose 
of  designating  the  members  of  a  new  profession  and  the 
person  or  firm  making  application  for  membership  in  a 
well  regulated  Real  Estate  Board  must  show  that  he  or 
they  have  integrity,  responsibility  and  sufficient  knowl- 
edge and  experience  in  the  business  in  all  its  branches  to 
enable  them  to  properly  safeguard  the  welfare  of  their 
clients  and  the  public  in  general. 

The  use  of  this  aptly  chosen  name  for  members  of  one 
of  the  most  responsible  and  honorable  of  those  profes- 
sions that  appertain  to  business,  is  becoming  more  general 
the  country  over  and  the  public  is  rapidly  reahzing  that 
firms  and  individuals  who  use  this  word  to  designate  the 
nature  of  their  business  are  to  be  depended  upon  for  effi- 
cient services  and  advice,  and  for  a  square  deal  in  busi- 
ness transactions. 

His  Work. 

The  work  of  the  Realtor  extends  to  many  angles  of 


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Modern  Real  Estate  Practice 


business  life,  rivaling  that  of  the  banker  or  lawyer  in  im- 
portance and  variety  of  businesses  affected  by  his  ac- 
tivities. 

Real  property  constituting  more  than  seventy  per  cent 
of  the  total  wealth  of  the  nation,  and  the  Realtor  being 
the  principal  custodian,  salesman,  adviser  and  developer 
of  this  vast  wealth,  his  work  taken  as  a  profession  na- 
turally assumes  a  place  of  vast  importance  in  the  welfare 
of  every  man,  woman  and  child  in  this  beloved  nation  of 
ours.  He  it  is  who  converts  the  cactus  covered  desert  into 
vast  orchards  of  oranges,  lemons  and  other  valuable 
fruits,  making  valuable  farms  where  once  only  parched 
sand  and  rattlesnakes  dwelt.  As  he  accomplishes  this  by 
bringing  water  to  the  desert,  on  the  other  hand  he  makes 
valuable  farming  land  out  of  the  impenetrable  swamps 
and  everglades  by  draining  them  and  clearing  them  for 
cultivation.  He  is  the  city  builder  and  beautifier,  mak- 
ing into  beautiful  residence  sections  raw  lands,  sometimes 
very  rough  and  of  little  value  to  the  erstwhile  owners, 
thereby  making  happy  homes  for  his  clients  as  well  as 
bettering  their  financial  condition.  The  home  owner  is 
recognized  as  the  foundation  stone  of  our  national  life. 
The  owning  of  a  home  promotes  interest  in  public  wel- 
fare, law  enforcement  and  civic  advancement,  as  well  as 
a  personal  and  family  pride  in  the  desire  for  everything 
that  goes  to  make  up  modem  civilization  and  culture. 

The  Realtor  is  often  the  promoter  of  vast  industrial 
districts  where  housing  for  factories  and  industries  of 
every  kind  are  furnished.  Also  he  often  times  furnishes 
heat,  light  and  power  to  his  clients  as  well  as  homes  for 
the  employees  of  these  establishments. 

He  is  often  the  builder  of  street  car  and  interurban 
lines,  even  building  railroads  in  some  cases  to  carry  the 
public  to  his  property  or  to  that  of  his  clients. 

He  builds  vast  apartment  houses  where  the  city 
dweller  is  furnished  with  every  convenience  that  modem 
ingenuity  can  contrive,  not  to  mention  countless  other 
kinds  of  houses  for  small  town,  city  and  country  people. 

He  is  the  promoter  and  planner  of  mos^  of  the  magni- 
ficent skyscrapers  and  business  buildings  of  the  cities  in 
our  midst,  oftentimes  being  the  direct  means  of  bringing 
large  business  and  industrial  enterprises  to  his  com- 
munity. 

Building  lakes,  parks  and  playgrounds  and  donating 


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them  to  the  public  and  his  clients  is  often  a  part  of  his 
day's  work.  Through  his  foresight  and  initiative,  streets 
are  paved,  good  roads  built,  and  countless  Benefactions  are 
brought  to  his  fellow  man  that  he  often  does  not  claim  or 
receive  credit  for. 

The  modern  city  is  largely  a  monument  to  the  brains, 
energy,  and  courage  of  the  real  estate  man.  Remove  his 
activities  from  the  community  and  business  chaos  would 
result.  Property  values  would  rapidly  decline  and  de- 
velopment would  be  slow  indeed.  In  fact  the  pioneer  set- 
tlers of  the  most  of  our  states  were  really  real  estate  men 
properly  speaking,  for  in  blazing  the  way  for  farms,  rail- 
roads, towns  and  civilization  they  were  the  counterpart 
of  the  modem  real  estate  man.  Oftentimes  they  opened 
up  vast  tracts  for  colonization,  thus  extending  the  bound- 
aries of  civilization. 

The  non-resident  property  owner  would  "Be  placed  in  a 
distressing  sifuation  indeed,  were  it  not  for  the  Realtor 
who  manages  his  property,  making  leases,  collecting 
rents,  making  repairs  and  alterations  as  well  as  render- 
ing and  paying  taxes  and  keeping  his  insurance  in  force. 

Newcomers  to  the  community  are  entitled  to  and  gen- 
erally receive  the  best  advice  and  counsel  of  the  realtor 
in  order  that  he  get  the  right  start  in  his  new  environ- 
ment by  securing  the  right  location  for  his  residence  or 
place  of  business.  The  knowledge,  experience  and  sound 
advice  of  the  well  trained  realtor  is  of  utmost  importance 
to  this  class  of  investors  or  renter,  as  often  the  difference 
between  a  properly  chosen  location  for  a  residence  or  a 
place  of  business  and  a  poorly  chosen  one,  spells  happi- 
ness and  success,  or  on  the  other  hand  discontentment 
and  business  failure. 

This  part  of  the  work  of  the  Realtor  should  and  gen- 
erally does  receive  his  best  thought  and  attention. 

His  Opportunities 

As  his  work  touches  such  a  manifold  variety  of  phases 
of  human  activity  so  do  the  opportunities  that  present 
themselves  for  the  display  of  his  talents,  character  and 
energies. 

Being  the  only  representative  of  such  a  vast 
and  important  part  of  the  wealth  of  the  country,  he 
is  as  a  consequence  sought  after  for  all  kinds  of  public 
service.  His  advice  and  counsel,  as  well  as  leadership,  is 
often  sought  by  City  Govemments,  Park  Boards,  School 


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>, 


Boards,  City  Plan  Commissions,  and  all  kinds  of  organiza- 
tions which  have  the  comfort,  convenience,  good  health 
and  beauty  of  their  community  at  heart.  Especially  does 
the  work  of  Park  Boards,  Road  Building,  Street  Paving 
and  widening,  and  City  Plan  Commissions  furnish  him 
with  rare  opportunities  for  valuable  service  to  his  fellow- 
man.  In  fact  most  of  these  kinds  of  commissions  had  their 
origin  as  the  result  of  the  activities  of  the  real  estate 
man.  His  love  of  civic  beauty  and  convenience  and 
knowledge  of  how  best  to  obtain  them  naturally  result 
in  the  widening,  paving  and  straightening  of  many  a  nar- 
row, crooked  street,  thus,  not  only  creating  new  and  high- 
er land  values,  but  creating  new  arteries  of  trade  and 
travel,  and  relieving  other  over-crowded  thoroughfares. 

In  his  development  of  residence  sections  he  has  vast 
opportunities  of  leaving  monuments  to  his  name  and  pro- 
fession by  the  building  of  beautiful  boulevards,  play 
grounds,  lakes  and  pleasure  resorts  that  remain  to  please 
the  eye  and  give  comfort  and  pleasure  to  countless  gene- 
rations after  he  is  gone.  Not  only  does  the  Realtor  have 
unlimited  opportunities  for  public  service,  but  he  has  rare 
chances  to  be  of  far  more  usefulness  to  many  of  his  clients 
than  merely  earning  the  commission  with  which  they 
compensate  him  for  his  services.  There  are  the  affairs  of 
the  widow,  minor  or  single  woman  who  have  been  left  or 
have  accumulated  property  or  funds  without  the  proper 
knowledge  of  how  best  to  invest  or  manage  them.  It  is 
one  of  the  rare  privileges  of  the  Realtor  to  be  able  to  so 
advise  or  manage  the  affairs  of  this  class  of  his  clients 
so  as  to  add  to  their  wealth  and  happiness.  By  following 
the  sound  advice  of  a  conscientious  Realtor  many  a  man 
has  converted  his  surplus  earnings  into  wealth  and  af- 
fluence. . 

Probably  his  greatest  opportunity  for  good  is  the  con- 
verting of  tenants  and  renters  into  home  owners,  they 
sometimes  afterwards  becoming  owners  of  other  prop- 
erty. The  importance  of  home  ownership  if  of  such  mag- 
nitude as  to  preclude  the  possibility  of  treating  it  fully  in 
this  article,  but  you  have  only  to  look  about  you  and  ob- 
serve the  difference  between  the  attitude  toward  public 
questions  of  the  average  shifting  class  of  tenants  and 
the  owner  of  a  home  even  though  it  be  a  small  lot  im- 
proved with  a  two-room  box  house.  The  pride  of  owner- 
ship and  the  knowledge  that  he  has  title  to  a  section  of 
this  earth  has  a  wonderful  influence  for  good  on  the  home 
owner. 


>     J  ^ 


It  is  said  that  France  is  a  nation  of  home  owners,  the 
land  being  divided  into  small  farms.  This  explains  the 
fact  that  it  is  the  greatest  nation  of  money  savers  on  the 
face  of  the  earth.  Their  remarkable  system  of  savings 
institutions  enabled  them  to  pay  the  staggering  indem- 
nity placed  upon  them  by  the  Germans  after  the  Franco- 
Prussian  War  in  the  amazing  period  of  one  year.  Love  of 
home  and  fireside,  accounts  for  the  almost  unparalleled 
defense  put  up  by  the  French  Army  against  invasion  in 
the  recent  World  War. 

Usually  the  best  governed  communities  are  those  with 
the  largest  proportion  of  property  owners. 

His  Responsibilities. 

The  responsibilities  of  the  Realtor  are  close  akm  to 
those  of  the  banker,  the  realtor  being  the  custodian  of 
business  property  and  other  forms  of  real  wealth  prop- 
ably  far  in  excess  of  actual  wealth  controlled  by  the 
banker.  He  is  called  upon  to  appraise  the  values  of  real 
property  as  security  for  loans  made  for  or  by  his  clients. 
He  is  frequently  called  upon  by  the  courts  for  expert  tes- 
timony relative  to  real  estate  matters  involved  by  various 
kinds  of  litigation.  Especially  is  this  true  in  condemna- 
tion suits.  Practically  all  committees  on  taxation  of  both 
city,  county  and  state  are  drawn  from  the  ranks  of  well 
posted  real  estate  men.  The  Realtor  is  often  called  upon 
to  serve  on  Arbitration  Committees  for  the  adjustment 
of  differences  between  property  owners  and  tenant  where 
long  time  ground  leases  are  involved.  During  the  late 
war  the  U.  S.  Government  called  upon  Realtors  the  coun- 
try over  for  patriotic  services  in  buying  and  appraising 
land  for  Government  use,  and  in  many  cases  the  Govern- 
ment was  saved  large  sums  of  money  in  the  leasing  and 
purchase  of  land  by  the  advice  of  conscientious  Realtors 
who  often  served  their  country  gratis. 

As  the  professional  men  of  other  lines  are  called  upon 
to  advise  their  constituents  in  their  various  activities,  so 
is  the  real  estate  man  called  upon  to  assume  a  large  share 
of  responsibilities  in  practically  every  transaction  that 
passes  through  his  office. 

The  purchaser  calls  upon  him  for  his  opinion  as  to 
present  and  future  values  of  property  under  considera- 
tion, and  he  has  the  added  responsibility  of  advising  the 
seller  in  many  cases,  relative  to  price  and  terms  which 
circumstances  warrant  him  in  recommending.    There  is 


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practically  no  other  character  of  business  life  where  both 
buyer  and  seller  so  frequently  call  the  salesman  to  assume 
responsibility. 

Ethics. 

Ethics  governing  his  relations  with  his  fellow  Realtors 
and  his  clients  can  best  be  set  out  by  referring  to  the 
"Code  of  Ethics"  which  govern  all  well  regulated  Real 
Estate  Boards  who  are  members  of  the  National  Asso- 
ciation. 

Follow  the  Golden  Rule. 

In  his  attitude  toward  fellow  brokers  as  toward  all 
mankind  each  should  endeavor  to  the  best  of  his  ability 
to  at  all  times  follow  the  Golden  Rule — "Do  unto  others 
as  ye  would  that  they  should  do  to  you." 

Criticism  of  Fellow  Brokers. 

A  broker  worthy  of  respect  and  confidence  will  never 
make  unfair  criticisms  or  untruthful  statements  regard- 
ing a  fellow  broker.  On  the  contrary,  he  will  cultivate  a 
friendly  relationship  and  respect  for  all  worthy  competi- 
tors. 

Speak  Well  of  Fellow  Broker's  Deal. 

Should  a  prospective  buyer  express  interest  in  a  prop- 
erty offered  by  a  competitor,  the  broker  should  treat  the 
proposition  as  well  as  the  absent  broker  with  fairness, 
however  anxious  he  may  be  to  sell  property  which  he  rep- 
resents. 

Ruining  Fellow  Broker's  Deal. 

A  member  of  a  Real  Estate  Board  cannot  honorably 
seek  information  concerning  a  deal  of  a  fellow  broker  and 
make  use  of  the  knowledge  for  the  purpose  of  closing  the 
deal  himself  or  diverting  the  customer  to  another  prop- 
erty. 

Fraudulent  Misrepresentations  Should  Be  Reported. 

As  a  duty  to  the  public  and  each  other,  members 
should  report  to  the  Board  misrepesentations  or  any 
fraudulent,  criminal  or  illegal  act  pertaining  to  real  es- 
tate, which  may  entrap  and  injure  innocent  or  ignorant 
persons ;  and  the  Board  owes  it  to  members  and  the  com- 
munity to  take  steps  to  stop  such  practices  and  to  punish 
parties  guilty  thereof. 


i 


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4 


Discipline  for  Violation  of  the  Code. 

It  is  the  duty  of  the  Board  to  punish  violations  of  its 
adopted  rules  or  ethical  conduct  by  proper  discipline. 

Duties  of  the  Agent  to  His  Client 

Agent  Should  Not  Accept  Agency  Unless  Equipped  to  Get  Results. 

Should  the  location  or  character  of  a  property  of- 
fered a  broker  to  sell  or  rent  be  such  that  he  cannot  ren- 
der prompt  and  efficient  service  he  should  either  enlist 
the  co-operation  of  a  fellow  broker  more  favorably  situ- 
ated or  recommend  that  the  owner  place  the  property  in 
the  hands  of  such  broker. 

Agent  Should  Intelligently  Advise  Owner. 

The  broker  should,  if  possible,  inspect  and  appraise 
such  properties  as  he  accepts  for  rent  or  sale,  that  he 
may  be  prepared  to  advise  the  owner  regarding  the  value 
of  each  and  the  prospects  for  securing  the  price  desired, 
also  that  by  becoming  personally  familiar  with  the  prop- 
erty he  will  be  able  to  render  better  service. 

Acceptance  of  Agency  a  Guarantee  of  Good  Service. 

When  a  broker  accepts  from  an  owner  the  exclusive 
listing  of  a  property,  the  latter  has  a  right  \o  understand 
that  such  acceptance  is  equivalent  to  a  guarantee  that 
the  broker  has  good  facilities  for  accomplishing  desired 
results  and  will  put  forth  consistent  effort  toward  that 
end. 

Agent  Should  Advise  As  to  Repairs. 

It  is  a  duty  of  the  agent  to  suggest  to  his  client  mak- 
ing such  repairs  or  improvements  as  will  make  the  prop- 
erty more  attractive  to  prospective  tenants  or  purchasers 
and  yield  increased  returns. 

Fictitious  Consideration  In  Deeds. 

It  is  the  duty  of  the  broker  to  encourage  naming  in  the 
deed  the  actual  or  nominal  consideration. 

Agent  Should  Not  Rent  for  Illegal  Purposes. 

The  agent  should  guard  the  reputation  of  both  the 
client  and  his  property  by  declining  under  any  and  all  cir- 
cumstances to  rent  premises  for  immoral  purposes. 
Should  an  owner  wish  him  to  do  so  it  is  his  plain  duty  to 


128 


Modern  Real  Estate  Practice 


decline,  even  though  it  results  in  the  property  being  with- 
drawn from  his  charge. 

Duty  of  Broker  to  Fit  Himself  to  Intelligently  Perform  the 

Functions  of  An  Agent. 

The  agent  or  broker  owes  it  to  his  chents,  as  well  as 
himself,  to  embrace  every  opportunity,  through  readmg, 
study,  inquiry,  discussion,  observation,  lectures  and  ad- 
dresses, affiliation  with  the  Real  Estate  Board  and  other 
public-spirited  organizations,  to  increase  his  knowledge  of 
things  pertaining  to  real  estate  in  his  community,  such  as 
special  assessment,  taxation,  sanitation,  fire  protection 
and  legal  liabilities  for  damages  on  various  accounts  to 
which  owners  and  agents  of  real  estate  are  liable. 

Do  Not  Give  Advice  to  Clients  Unless  Qualified. 

When  applied  to  by  a  client  for  information  or  advice 
on  a  real  estate  matter,  the  agent  or  broker  should  never 
turn  the  applicant  away  with  an  illy  considered  or  "curb- 
stone" opinion.  He  should  either  decline  to  advise  or  take 
time  to  familiarize  himself  with  the  essential  details  of 
the  case,  making  a  fair  professional  charge  therefor, 
when  the  circumstances  warrant.  Unless  he  is  thorough- 
ly informed,  the  broker  should  not  undertake  to  give  his 
client  legal,  engineering,  architectural  or  other  technical 
advice ;  he  should  refer  him  to  an  expert  in  that  line. 

Duties  of  the  Agent  to  the  Customer. 

Duty  to  Owner  Can  Never  Justify  Misleading  the  Customer. 

An  invitation  to  do  business  with  him  extended  by  an 
agent  to  the  public  should  be  a  guarantee  of  honorable 
and  straightforward  dealing  in  any  other  manner. 

Agent  Should  Inspect  Property  Before  Offering. 

In  order  to  accurately  describe  property,  its  location 
and  surroundings,  to  avoid  error,  exaggeration  or  charges 
of  bad  faith,  an  agent  offering  it,  should  if  possible,  make 
a  personal  examination  of  property,  before  presentmg  it 
to  a  customer. 

Agent  Should  State  Facts  Only  In  Offering  Property. 

The  agent  should  offer  each  property  solely  on  its 
merits  as  to  location,  convenience,  plan,  quality  and  pnce, 
affording  full  opportunity  to  inspect,  making  no  exag- 
gerated or  misleading  statements,  giving  truthful  replies 


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Dallas   School  of   Commerce 


129 


to  questions  asked  and  not  in  word,  act  or  any  other  man- 
ner become  chargeable  with  deception. 

Broker  Should  Collect  But  One  Commission  On  Each  Property 

Dealt  On. 

A  broker  employed  by  a  customer  to  buy  or  rent  prop- 
erty is  the  customer's  agent  and  cannot  act  for,  and  ac- 
cept commission  from  the  seller  without  knowledge  and 
consent  of  both  parties. 

These  articles  illustrate  the  high  moral  standard 
which  Realtors  have  adopted  as  a  guide  to  those  engaged 
in  the  business.  They  amount  to  a  guarantee  to  the  pub- 
lic against  crooked  and  inefficient  dealing  and  are  on  as 
high  a  plane  as  that  of  any  other  profession. 

The  modem  real  estate  man  must  be  equipped  with  a 
general  education  before  he  may  expect  to  make  a  suc- 
cess in  his  chosen  profession.  If  a  young  man  is  properly 
educated  and  is  naturally  adapted  for  it,  there  is  no  pro- 
fession more  remunerative,  interesting  and  constructive. 


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